by. P. Homewood, Mar 13, 2022 in NotaLotofPeopleKnowThat
This single chart from the US EIA explains just why oil prices are shooting up there:
The oil boom initiated by Trump saw crude oil output increase by a half between 2016 and 2019.
Output naturally collapsed in early 2020 as a result of the pandemic, which affected both supply and demand. But since then output has only slowly recovered, and is still 9% below 2019 levels.
It is worth pointing out that demand in 2021 was still not back to 2019 levels. Assuming it recovers this year, it is likely to put further upward pressure on prices, unless production increases as well.
To put the numbers into perspective, the US produces a sixth of the world’s crude oil. The increase US output between 2016 and 2019 was 205 million tonnes, and represents 5% of global output.
Small changes in supply have a disproportionate effect on international oil prices, because demand is so inelastic. An extra 5% on world production would have a significant impact on prices.