It’s pretty absurd that the US government talks out of both sides of its mouth on this issue. There’s an effort to divest from oil, shut down permitting, and discourage investment. And when companies respond to this by reducing investment, there are claims about “windfall profits” and “price-fixing”.
There’s no grand conspiracy here. Shale companies over-invested in growth, lost their shirts in 2015, and got punished by investors (or went bankrupt). Then prices recovered, they over invested in growth, and got demolished again as oil prices crashed and even briefly went negative in 2020.
Fresh off these two crashes, it’s not surprising at all that companies are exercising capital discipline and not taking on debt to drill. Shareholders don’t want them to do that!
I traded crude oil professionally until early 2022 and I remember that was how we justified low domestic production in mid 2021 as well (i.e. "producers think these prices are temporary, so they aren't investing").
In retrospect (and these are all guesses with hazy memory) we probably overestimated the cost of turning an oil well on and off.
But exchanging text messages with OPEC to price-fix is damning. An active right wing party would decry this as foreign interference and communism (where's the free market?). Even ignoring the market impact, how can you let domestic producers collaborate with foreign governments to control such a serious macroeconomic input like this? It's like China paying Intel a bribe to produce worse chips.
There’s no grand conspiracy here. Shale companies over-invested in growth, lost their shirts in 2015, and got punished by investors (or went bankrupt). Then prices recovered, they over invested in growth, and got demolished again as oil prices crashed and even briefly went negative in 2020.
Fresh off these two crashes, it’s not surprising at all that companies are exercising capital discipline and not taking on debt to drill. Shareholders don’t want them to do that!