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What Is the Actual Cause for Excessive Gasoline Costs? - Pak Auto Services

What Is the Actual Cause for Excessive Gasoline Costs?

What Is the Actual Cause for Excessive Gasoline Costs?


When fuel costs spike, we argue.

It’s the present president’s fault. It’s the earlier president’s fault. It’s concerning the Russian invasion of Ukraine, and on and on.

Now Yahoo! Finance columnist Rick Newman means that politics and struggle aren’t the issues, however easy economics are.

Newman says that whereas sanctions in opposition to Russian oil play a component, oil corporations are reluctant to provide extra oil as a result of in the event that they overproduce, they’ll see their earnings sink.

He factors to an oversupply scenario that existed from 2015 to 2020, and the way earnings cratered throughout that point, earlier than the coronavirus pandemic made the scenario even worse.

There have been some requires the Biden administration to permit for extra drilling, however Newman cites a coverage knowledgeable who says that it received’t matter: “The quantity of oil and fuel leasing the Biden administration has achieved makes completely no distinction within the quantity of oil and fuel we’re producing proper now,” mentioned Samantha Gross, director of the power safety and local weather initiative on the Brookings Establishment.
“These items take some time. The business tends to have a backlog they’re determining what to do with.”

Newman additionally notes that the Biden admin has been criticized by environmentalists for permitting an excessive amount of drilling, and that the majority drilling takes place on non-public land — which means there’s no want for federal permits anyway.

I’m not defending or critiquing the admin right here, nor am I evaluating Newman’s claims. Whereas I/we try this typically right here, I’m not well-versed within the oil market sufficient to essentially know if he’s right or not. However I did discover the piece intriguing as a doable explainer for what’s taking place with gasoline costs.

I’m additionally a fan of Occam’s Razor — the only rationalization is the more than likely. It appears to me that for all of the hullabaloo about gasoline costs, it’s seemingly that straightforward enterprise realities, and never political choices, are the reason for excessive costs on the pump.

Newman might or might not be proper, however it’s meals for thought.

[Image: PROD]

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December 2022