I’ve been looking into this question since it came up in the Forum recently. The answers are somewhat complex, but it turns out there really are “evil doers” to blame.
The first thing I learned is that there is no physical shortage of oil in the world. Every major oil country could produce more, and has produced more in the recent past.
Second, there are no significant supply chain problems making delivery and distribution of oil and oil-based products more difficult.
Finally, while journalists tend to use loaded language to describe it, demand for oil today is about the same as it was before the pandemic. Demand is not “surging” or “soaring” as you may read, but has simply returned to normal after a temporary sales decline (not counting aviation fuels).
On the whole, supply and demand cannot explain the rise in fuel prices, although the old chestnut of supply-and-demand reasoning is widely used to create misleading narratives.
So, what is happening?
In broad outline, it appears that oil companies and their investors simply want higher prices. This is understandable on many levels: Everyone who stands to gain from higher prices almost always wants them. This, BTW, would include so-called “green investors.”
What’s different today is that our political establishment also wants higher oil prices, and is taking steps to encourage them. The Biden administration openly wants to replace the oil industry with some form of expanded electrical industry. If you are an oil producer or investor, now is the time to harvest profits before cashing out of that market.
Consider the new and more aggressive regulation of methane pollution, for example. The regulations will add to the cost of oil at every stage, but will also give the industry an opportunity to raise prices slightly in excess of the regulatory burden. The result will be profits derived purely from rent as economists understand the term. This dynamic amounts to government “paying” industry to go out of business.
It is almost impossible to describe the enormity of the moral problem in collusions of this type. In a healthy, non-distorted economy, profits derive almost entirely from process improvement leading to greater productivity. With Joe Biden, oil profits are being made simply by raising prices. Real people are going to be hurt.