But supply has not kept pace, much like strained supply lines have raised food prices and impaired the flow of cars, electronics and other goods. By turning much of the world against a major oil and gas producer in Russia, the war in Ukraine only made supply problems worse.
Some of the supply issues are by design. OPEC Plus, a cartel of oil-producing countries that includes Russia, has worked to keep prices — and therefore profits — as high as possible by limiting supply. The cartel has held fast to its approach.
But it is not just OPEC. American oil companies have deliberately slowed production after a pair of recent fracking boom-and-bust cycles left them with a glut of supply and plummeting prices. “We’re having the third boom, and these executives don’t want to have the third bust,” Kloza said.
All of that leaves few good solutions in the short term. Even if public pressure or a strained market eventually pushes producers to drill more, new production can take months to spin up, especially given labor and supply shortages. And even if U.S. producers step up, OPEC Plus could decide to cut back — to keep prices high.
Other potential solutions that lawmakers have mentioned or enacted, like a gas tax holiday or direct cash relief, could make inflation worse by putting more money in people’s pockets and keeping demand high without necessarily increasing supply. “We’re not in a position to help households right now because it would cause more inflation,” Jason Furman, an economist at Harvard, told me.
Meanwhile, some experts suggested that the best chance of a quick decline in gas prices is an outcome nobody wants: a new Covid variant or a recession tanking the economy and demand.
A cascading problem
Gas prices tend to get disproportionate attention compared to their actual economic impact, Furman said.