Oil companies are price gouging during energy crises.

Context#

When oil prices spiked in 2022, politicians accused oil companies of "price gouging." This fundamentally misunderstands how oil markets work.

Evidence#

How Oil Prices Are Actually Set

• Oil trades on global commodity exchanges (NYMEX, ICE, etc.)
• Prices determined by thousands of buyers and sellers worldwide
• No single company controls more than 5% of global production
• Oil companies are "price takers," not "price setters"
• They sell at whatever the market price is—they can't charge more

What Caused 2022's High Prices

• Russia's invasion of Ukraine disrupted global supply
• Western sanctions removed Russian oil from markets
• OPEC+ production decisions
• Years of underinvestment due to activist pressure
• Post-COVID demand surge meeting constrained supply
• None of these factors were controlled by Western oil companies

The "Record Profits" Context

• High prices = high revenue for all producers
• But margins (profit percentage) were similar to normal years
• 2020 saw record losses—companies lost tens of billions
• Profits are cyclical; 2022 followed catastrophic 2020
• Investors need returns to justify the enormous capital requirements

What "Gouging" Would Require

• Individual companies controlling prices (they don't)
• Ability to charge above market rates (impossible in commodities)
• Coordination between competitors (illegal, not happening)
• None of these conditions exist in oil markets

Who Actually Sets High Prices

• OPEC nations control 40% of production
• Russia is a major producer
• Government policies affect supply (drilling bans, permit delays)
• The same politicians accusing companies of gouging often restrict production

Analysis#

This claim is false. Price gouging requires the ability to set prices above market rates—something oil companies simply cannot do. They sell oil at the global market price, period.

High profits during high-price periods are not "gouging"—they're basic economics. When commodity prices rise, producers of that commodity make more money. When prices crash (as in 2020), they lose billions.

The "gouging" accusation is political theater. The same officials making these claims often support policies that restrict domestic production, ensuring higher prices and more dependence on foreign producers. If they wanted lower gas prices, they'd encourage more drilling, not blame companies for market conditions beyond their control.