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Crude oil is down more than $20 from last month, but prices at the pump remain high


Crude oil prices are down more than $20 from their peak last month. President Biden has tapped the Strategic Petroleum Reserve and reopened oil leases on public land, and yet gas prices remain stubbornly high. So then where's this stubbornness coming from? We're going to talk petroleum now with Ben Storrow, an energy reporter for E&E News. Ben, thanks for joining us.

BEN STORROW: Thanks for having me.

RASCOE: So a couple weeks ago, Congress called oil executives to testify about prices. And there were accusations about price gouging and profit hoarding from the lawmakers, including Colorado Democrat Diana DeGette.


DIANA DEGETTE: The American people, who we represent, provide the industry with more than $30 billion a year in subsidies while the oil and gas companies report record-high profits and while American families are forced to pay record-high prices at the pump.

RASCOE: Ben, is that an accurate statement about profits and about subsidies?

STORROW: Do they receive subsidies? Yes, they absolutely do.

RASCOE: Well, they say they - when I covered the oil industry, they said they did not (laughter). That's their argument.

STORROW: I mean, they...

RASCOE: But, of course, they receive tax breaks, right?

STORROW: Right, right. So, I mean, it all depends - what is your definition of a subsidy? But I would say that the political narrative around oil prices is really detached from economic reality. For the Democrats, we're hearing about Putin's price hike and price gouging. From the Republicans, we're hearing about Keystone XL and public lands drilling. Those are really secondary factors, at best, for why Americans are paying more for gas today.

RASCOE: So what is driving the price of gasoline for people?

STORROW: In a word, it's COVID. There was a day early in 2020 when oil prices went negative.

RASCOE: I remember that.

STORROW: The oil companies essentially slashed their drilling budgets, they lay down their drilling rigs and the drilling teams dispersed. But then, you know, oil demand came back really pretty quickly, to the point where, today, there's labor shortages. You know, one of the most common jobs in the oil field is truck driving. Well, who's hiring truck drivers? Amazon. You got to get those guys back now. And then on top of all of this, you throw the Ukraine war into the mix.

RASCOE: So this past week was the fifth in a row that U.S. energy firms added oil and natural gas rigs. Does that mean that supply is going to start, you know, catching up with demand?

STORROW: You know, one of the things that's been really interesting about this is that normally when you see prices where they are, that number - that rig count number would shoot up pretty quick. And it's been going up slowly. And so the question has been, why? The Dallas Federal Reserve Bank did a survey of oil and gas producers last month, and 60% of them said the reason was capital discipline, which is to say Wall Street doesn't want them going out there and drilling a million wells and flooding the market with oil because that's just going to taint the business.

RASCOE: You know, I mean, is it a bit of, like, the eye of the beholder? You have oil companies calling it capital discipline. But Diana DeGette - Congresswoman Diana DeGette calls it gouging the consumer.

STORROW: I mean, to be totally truthful, I was wondering the same thing. And I asked some people about it with a number of different viewpoints on the oil industry. And, you know, in general, the answer that I got was, no. What's happened with oil and, really, as an industry, one of its big long-term challenges is that two years ago, prices were negative, and today, they're over a hundred dollars. And one of the reasons why oil has become so fundamental to our life is because it's been stable. And these big fluctuations in price - they introduce a lot of risk into investment decisions. The analysts that I talked to said that it wasn't so much gouging because it's a very risky business.

RASCOE: It seems like the fundamental thing is that what is good for the oil business is not necessarily good for the energy consumers. And that seems to be the conflict that continues to happen. You know, I mentioned earlier that the Biden administration tapped the Strategic Petroleum Reserve, and they're going to restart oil lease sales on public lands. Is there anything else that the government can do to help relieve high gas prices?

STORROW: In the short term, there's really not a lot they can do. And, I mean, those releases from the Strategic Petroleum Reserve - you know, those were coordinated with a number of other countries around the world - amounts to about 1 million barrels a day. The global oil market is a hundred million barrels a day. It's a drop in the bucket. And there's not a lot that the administration can do in the short term.

The interesting question for the Biden administration is, can they use this moment to try to prepare for future crises, and can they drive more investment in electric vehicles or public transportation, things like that - things that might sort of reduce that demand side in the future so that Americans are not really subjected to these really volatile swings in oil price?

RASCOE: That's Ben Storrow of E&E News. Ben, thanks for joining us.

STORROW: Thank you for having me. This is great. Transcript provided by NPR, Copyright NPR.

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