It is easy to blame President Biden for the increased price of gasoline. But it is wrong to do so.
The issue is more complicated than that, but war profiteering by US oil companies goes a long way in explaining why gas prices remain stubbornly high.
Should we blame Russia? Russian oil accounted for less than 0.005% of US production prior to the import ban imposed in 2022.[1] Increases in the cost of gasoline aren’t due to the Russian oil ban alone.
Instead, war profiteering by the oil companies and collusion with Saudi Arabia allowed oil company profits to increase by 200% in 2022 to a new record of $281 billion (after the begining of the war in Ukraine).[2]
The big three oil companies (Shell, ExxonMobil, and BP) alone had record profits of $85.6 billion in 2023.[3] Dividends and share buy backs were $114 billion.[4],[5] The growth in oil companies profits far surpassed the rate of inflation and are not explained by traditional market forces of supply and demand.
At the request of President Trump in 2020, the Saudis cut oil production by 2.5 million barrels/day. Other OPEC members cut production by an additional 7.2 million barrels per day.[6]
The Saudis have extended cuts in production levels several times to support of Russia, who is part of the OPEC+ cartel. Both autocracies benefit when global oil prices rise. While a contributor to increasing gasoline prices in the US, the cuts by OPEC do not fully explain the high cost that Americans are seeing at the pumps.
The US is the largest producer of crude of in the world with exports of than 4.1 million barrels per day.[7],[8] US oil production is sufficient to meet our demand and still allow for record exports. Therefore, crude oil supplies are not a factor in explaining higher gas prices.
Ninety percent of all Bureau of Land Management lands are open to oil and gas leasing.[9] Oil companies have more than 9,000 leases on federal land and the outer continental shelf that remain unused by big oil. Clearly drilling approvals are not the reason for inflated oil prices.[10]
Given that the US is energy self-sufficient, the question remains why has the price of gasoline continued to increase?
While the issue is complicated the explanation is relatively straight forward. The trickledown economics that started with Ronald Reagan set the stage for the war profiteering in the oil industry that we see today.
This is the “free market” at work. Blame Biden. It's easy. But it's also wrong.
[2] https://www.theguardian.com/business/2024/feb/19/worlds-largest-oil-companies-have-made-281bn-profit-since-invasion-of-ukraine
[3] https://www.washingtonexaminer.com/policy/energy-and-environment/2834541/oil-and-gas-supermajors-recorded-big-profits-in-2023/#:~:text=Three%20of%20the%20largest%20oil,further%20oil%20and%20gas%20production.
[4] “In 2023, we returned more cash to shareholders and produced more oil and natural gas thanany year in the company’s history,” said Mike Wirth, Chevron’s chairman and chief executiveofficer. (refer to footnote 3)
[5] https://www.bloomberg.com/news/articles/2024-02-07/big-oil-pays-out-record-114-billion-in-share-buybacks-and-dividends?embedded-checkout=true
[6]https://www.reuters.com/article/idUSKBN22C1V3/#:~:text=After%20the%20conversation%20with%20the,confirmed%20they%20had%20restarted%20negotiations.
[8]https://www.eia.gov/todayinenergy/detail.php?id=61584#:~:text=U.S.%20crude%20oil%20exports%20established,crude%20oil%20exports%20was%20lifted.
[9] https://www.americanprogress.org/article/the-oil-industrys-grip-on-public-lands-and-waters-may-be-slowing-progress-toward-energy-independence/
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