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Gasoline prices in the US have increased dramatically over the last few months. The chart below reflects the price of crude oil stored in Cushing Oklahoma as recorded by the US Energy Information Administration.

The chart indicates that the current price of oil in the US is not at its highest level in recent years (and, corrected for inflation, is significantly lower than it was during the oil embargoes of 1973 and 1979). It also shows that the higher price is likely more noticeable because of the very low prices in early 2020. Nonetheless, the high price today has become a political problem for many in the US.

There have been a variety of explanations for the price increase. Some blame oil shortages caused by the sanctions against the sale of Russian oil. Others point to environmental regulations in the US, particularly with respect to building pipelines (the XL pipeline is often mentioned even though that oil was never meant for US domestic consumption). But the Dallas Fed did a survey of 132 executives from oil and gas producers in the US and came to a different conclusion, as indicated by the graph below:

The evidence seems conclusive: the oil and gas executives say that they are under pressure from investors to restrain production in order to satisfy their investors. In other words, the high prices are not due to “market” forces of supply and demand but are rather the result of a deliberate strategy to restrain production in order to induce higher prices. I am not surprised by this result and the message needs to be publicized more broadly. The New York Times suggests that this strategy is possible:

“At the urging of environmental groups, Democrats are going on the offensive on gas prices — hitting energy companies with a populist message that puts the party squarely at odds with Republicans and the oil industry.

“To do otherwise would be ‘dangerous and political malpractice,’ Geoff Garin, a Democratic pollster, argued in a memo published on Thursday.

“In a survey, Garin found that 60 percent of voters viewed ‘price gouging and excessive price increases by oil companies to increase their profits’ as major reasons that gas prices have risen to a national average of $4.29 per gallon.

“’They’re jacking up prices, and people see that,’ said Pete Maysmith, a senior vice president for campaigns at the League of Conservation Voters, which co-sponsored the poll.”