Oil companies report record profits while motorists pay record-high prices at the pump
WGVU spoke with the head of GasBuddy revealing factors at play.
As the pandemic raged in 2020, world economies contracted and travel was limited.
“The price of oil plummeted. Demand plummeted. Oil companies were hemorrhaging money left and right. They didn’t have a choice but to shutdown a lot of production, lay a lot of people off.”
Patrick DeHaan is head of petroleum analysis at GassBuddy. He explains when economies broadly reopened in 2021, there was a jolt to the system. Oil supply couldn’t keep up with demand. And it was compounded by OPEC allowing inventories to plummet.
“And then from there, OPEC just didn’t raise production quickly enough.”
As nations impose sanctions on Russia for its invasion of Ukraine, removing Russian oil from global markets, DeHaan describes the situation as an energy crunch.
“Given the precarious situation that I’m describing, that demand has been ahead of production, you’ve blown the gap out even more.”
Supporting record profits for oil producers.
“And yeah, oil companies are price takers. If the price is $150, they’ll take it. If it’s $20, they have to take it. If it’s negative $38, they have to take that, too. They don’t set price.”
Market traders set price. DeHaan says current conditions incentivizes oil companies to increase production.