With prices at the pump reaching peaks not seen in more than a decade, many Americans are feeling the pinch, and elected representatives are eager to take action to help. Public policy changes can shape markets in the long-term, but the price of gas is determined by the balance of supply and demand, even more than most products we buy. In fact, the federal government has few options to affect gas prices without violating the foundations of our market-driven economy or creating problems for the future.

In contrast, the oil and gas industry’s production decisions directly affect oil supply and the price of gas. Despite high prices, U.S. oil production has remained essentially flat since November 2021. Executives of many oil and gas companies have said they are intentionally not investing in increasing production out of pressure from their investors. Companies are choosing to limit production and keep the price of oil high so they can have more capital to return to their shareholders.

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