- Sep 16, 2008
A viral piece of copypasta gets a few things wrong about gas prices.
This part is really important.
It’s also misleading to say that the United States can’t produce enough oil domestically to meet demand due to government restrictions. A recent survey of U.S. oil producers found that the majority of companies cited “investor pressure” as their reason for not expanding production. Only 6% of those companies cited government restrictions. CBS News reported:
As to why they weren’t drilling more, oil executives blamed Wall Street. Nearly 60% cited “investor pressure to maintain capital discipline” as the primary reason oil companies weren’t drilling more despite skyrocketing prices, according to the Dallas Fed survey.
Only 11% cited environmental, social or governance issues; 8% said they had difficulty getting financing; 15% cited other reasons.
“Investors in energy stocks have been a bit thrown off by the volatility, so they’re looking more for energy firms to pay back down their debt, or return money to shareholders, rather than going and investing in new wells — even if those new wells would be profitable,” Ashworth said.
In other words, many companies are choosing to enjoy their high profits rather than increase the supply of oil. That’s despite the relatively low oil price they would need to turn a profit. On a different Dallas Fed question, executives said oil prices between $23 and $38 a barrel, on average, would cover the cost of drilling new wells.