The global oil market has undergone remarkable events over the past 24 months:
A global pandemic caused massive demand disruptions just as supply increased, and the price of oil fell below zero for the first time in April 2020.
Workers slowed by the disruption left the industry.
As demand slowly returned, production struggled to keep up, pushing up prices.
Safe and effective vaccines were introduced to fight the coronavirus, and the economic recovery exploded in early 2021.
Russia, which produces 8% of the oil consumed in the United States and the lion’s share of the natural gas flared in Europe, decided to invade its neighbor Ukraine in February.
In retaliation for the unprovoked invasion, the United States imposed economic sanctions on Russia, including a ban on oil and gas imports.
Domestic producers cannot find workers or supplies to increase production to compensate for Russia’s exodus from the world market. Many of them are content to let today’s high prices trickle down to the bottom line.
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Crude closed Friday at $113 a barrel.
What do we do now, other than pay $4 a gallon for gas? We find someone to blame because it makes us feel better. The last time gasoline was this expensive was in the spring and summer of 2008, and we all wanted to blame former President George W. Bush. Today, it is President Biden’s turn to go through the mill. Very few things infuriate Americans more than a spike in gasoline prices.
Oil peaked at $145 a barrel in July 2008, but had fallen to $31 by Christmas at the start of the Great Recession. This recession was the worst economic recession since the Great Depression and wiped out the overheated housing market and the savings of millions of Americans. (At least gas is down to $2.)
There are two major differences between 2008 and today. First, labor shortages abound in virtually every industry. In a Page 1 article on Saturday, Texas Tribune reporter Mitchell Ferman quoted John Volke, CEO of Crew Support Services – a company that houses oil field workers, as saying: “Each of our customers tries to hire 20 to 40 people – hands on the ground, work to rig the pipe. I don’t know where these people went to work, Amazon? »
Not exactly. Waco’s billion-dollar Amazon fulfillment center was supposed to open six months ago, but can’t find enough workers.
The second difference in this shortage of supply is the environment. Wall Street investors aren’t as optimistic about the oil field as they used to be, thanks in large part to the environmental movement. Investors have dumped oil company stocks over the past 10 years, opting for more environmentally friendly energy investments. A short-term price spike is not enough to reverse this trend.
In November, Trib columnist Alan Northcutt wrote on this page about the significant outcomes of COP26, heralded as the “last best hope” for tackling the climate crisis. Northcutt reported that “11 countries, including France, Costa Rica, Denmark and Ireland, have launched a first-ever alliance formed to set an end date for national oil and gas exploration and extraction. . This reinforces the scientific mandate to leave about 70% of today’s fossil fuel reserves in the ground. »
Energy policy is entering an era of transformation. We need to clean up our planet, but we also need to fuel our economy. It’s a tightrope even in a perfect world, a world that can’t stand the scourge of volatility.
As Americans struggle to get by under the sometimes crushing weight of higher energy prices, remember to assign blame where it’s due: Vladimir Putin, and no one else.