Editor, Gettysburg Times,
The Populist media are blaming everything on President Biden from the heartbreak of psoriasis to the price of gas. I figured I would set the record straight on at least one item that is making headlines today- the price of gas.
After doing considerable research, the main reasons that global gas prices are so high is because of COVID and the limited supply of inexpensively extractable oil. The Ukraine War is also a factor, especially to Europe as Russia supplies 10% of the world’s petroleum.
COVID caused massive losses for oil refineries, workers were laid off and maintenance of refining infrastructure didn’t occur. Since then, the world has rebounded from the pandemic, and oil demand has come roaring back.
Consumers who didn’t travel in 2020 and 2021 are making up for lost time now. Global oil demand is back to where it was pre-COVID. But oil production takes a lot longer to restart than oil consumption.
Oil producers have been cautious about increasing production quickly, for fear of continued volatility in the market. OPEC and other major oil producers are gradually restoring the exports they took off the market during the worst of the pandemic.
Even now, with prices soaring, energy companies are being cautious about ramping up their oil output. They’re slowly putting new rigs to work drilling more wells, which helps. But they’re also limiting how much they invest in new production so that they can reward their investors with bigger dividends and stock repurchases.
Petroleum supply is also affecting decisions being made by oil producers and gas companies. The remaining supply of easily extractable oil is limited. The exact amount is difficult to predict.
According to the U.S. Energy Information Administration, the global supply of crude oil, other liquid hydrocarbons, and biofuels is expected to be adequate to meet the world’s demand through 2050. This doesn’t mean that we will have expended the global oil supply, but rather, oil is becoming more difficult to extract in a cost-effective manner with present technology.
Companies will not develop these unconventional resources unless consumers are willing to pay the price (economic and environmental) or governments heavily subsidize oil production or consumption. At some point, unconventional oil exploration will get too expensive, and consumers will have to look to lower-cost alternatives.
Alas, elections are coming. I am sure the politicians will have plenty of gas to go around.