High oil prices are causing severe inflation, with fuel prices reaching record highs in the US. This prompted the Biden administration to put pressure on oil companies to increase production.

However, Joe Biden is trying to boost production to no avail, as big oil companies shirk the request, Hungarian economic paper Vilaggazdasag reports. The oil companies argue that

they can only increase production moderately due to disruptions in supply chains and labour shortages.

Despite this, companies’ revenues are skyrocketing. The effects of the war in Ukraine have not only driven up the value of energy commodities, but are keeping them high. This is well illustrated by the fact that Saudi Aramco’s net profit increased by 124 per cent in 2021 compared to the previous year. Exxon Mobile in the US also posted good results, doubling its profits in the first quarter of this year compared to the first three months of 2021. It is noteworthy that Exxon Mobil performed strongly despite the fact that it had to cease its operation in Russia due to the war, which was quite a costly move.

In general, oil companies would react to higher crude oil prices by sharply increasing production. Under normal circumstances, increased supply leads to a fall in prices, but

with the fragmentation of supply chains, labour shortages and sanctions on Russian oil, increased production is unlikely to cause the prices to return to normal in the short term.

In response to the surging oil prices, many have raised the possibility that the world price of the ‘black gold’ could be decreased by releasing more shale oil onto the market. This could be a viable alternative, but comes at a significant price. With current technologies, shale oil production is not only more expensive than conventional production, it is also very harmful to the environment.