Since the last year, there has been a rise in the petrol price, and after the invasion of Russia in Ukraine, it has hit $100 a barrel. It was the first time in the 12 years that the price hit the triple-digit. The high gas prices hammer consumers, and US producers are even drilling more oil. It is the price where many oil companies start grabbing the land and drilling new wells. It is because it increases the profits without increasing the cost of production.
But in a survey according to S Chronicles, when it was asked to the people, the oil executives responded that oil production does not depend on the price. But some people said that there is expansion once the price goes above $120. At $120 per barrel, you will find that it is profitable at that price and is adequate to increase oil production. For the increase of gas, the prices of crude oil are responsible.
Impacts of high gas price on Consumers
When there is a high in prices, that can cause environmental, governance, and social effects, affecting the consumers. Some of how high gas prices affect the consumers are-
- High gas and oil prices can affect the lives of people in several ways, leading to higher inflation. That leads to the high prices of essential goods such as food, medicines, and others.
- Middle-class people suffer the most from the high price as their income does not increase.
Impacts of high gas price on Producers
- As per the survey, many oil executives said that the production or the expansion of the oil does not depend on the oil price.
- But some of them say that it does affect the production as if they produce the oil at a high price, then that will improve their profits, and they can expand their production.
Many energy companies have paid down their debts and returned the money of their stakeholders instead of investing in the production of new wells. Even if they knew that these wells do offer them profits. The Dalla Fed has recently polled the CEO of fossil fuels, and many of them have also sworn that they will not increase the production of oil just to preserve the profits.
The Dalla Fed Executives have also said that if the prices of oil are between $23 and $38 a barrel, then only they can cover the cost of drilling the new well so easily. It has also been stated by the CEO Darren Woods (ExxonMobil) to the investors that one of the main goals of the producers should be high quality and profitability goals instead of high volume and quantity goals.
He also stated that an increase in production is not what they expect. However, they can earn profits if they will evolve with time and continue to cask the quality, and that will help in increasing the portability of the company. To read about this in detail, you can check S Chronicles.