Price manipulation in the oil market
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Illustration: Peter and Maria Hoey
 
Dear reader,
We have high inflation because of broken supply chains. But companies have also used the inflation headlines as an excuse, to control supply and raise prices well above their shipping and distribution costs. “What we really want to find are companies with pricing power,” said one portfolio manager.

For our special supply chain issue, Prospect writing fellow Lee Harris looked at a particular sector experiencing this phenomenon: the shale oil industry. Here, a decade of misinvestment, fueled by Wall Street and cheap credit, crashed with the pandemic in 2020. But the industry adjusted, engaging in repeated mergers and deliberately slowing production to goose profits, a cycle that investors hope will continue for years. Meanwhile, energy trading houses bought oil cheap and are “capitalizing on market dislocations.” In other words, oil interests are creating the bottleneck that Wall Street desires.

The climate-heating emissions caused by fracking make production slowdowns rather positive for the world. But it’s an example of market manipulation that we see replicated across our economy. Commodity traders and large companies have wrested control over necessities, and are dictating who can get them and at what price.
You can read Lee Harris’s story here.  
You can read our entire special issue on how outsourcing, monopolization, deregulation, financialization, and just-in-time logistics broke our supply chains at
prospect.org/supplychain
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David Dayen, Executive Editor
The American Prospect
 
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