Nobody controls energy prices. OPEC can and does influence prices. But OPEC hardly knows solidarity; some of it’s members are notorious cheaters on production allocations. The overwhelming majority of wells drilled in this country (U.S.) are drilled by independents who can’t do diddily about the price.
And the oil and gas industry is composed of internal markets that compete with each other. When the market is tight, refiners and pipelines must pay more to producers for their feedstocks. If the price of their feedstocks are high, then the price of their products will reflect that. As prices increase, demand on infrastructure may increase (but not always - see below) and you may have a situation such as existed a couple of years ago. Demand increased to the point where you could not get a rig on less than about four months notice, and the rig rates had increased to a point that a well that seemed economically feasible in 1998 was not in 2001. So that well didn’t get drilled in 2001. Rig rates were too high because the rig fleet had shrunk after the drop in North American drilling that led to the historic low of 488 rigs working in April of 1998. By contrast, there were ~4500 rigs working in North America in 1981, and the rig rate has been stagnant at ~1100 recently. So, while they could, the drilling companies charged the exploration and production companies more than some could see paying.
Was demand for energy high in 1998? Sure it was. That was during the days of the dot.com boom and the high-rolling days of Enron and WorldCom and the like. While we later saw the mythical proportions of that economy, at the time investor dollars were hard to direct away from that market towards drilling.
Seismic crew activity is a leading indicator in the oil and gas industry, and it’s not a pretty picture right now; although there are signs of recovery. There are probably about 20 seismic crews operating in North America right now. Once again, by contrast, there were ~750 working in 1981 and ~100 in 1994. Guess what? Exploration companies are finding that new seismic data acquisition costs can be rather high. Too high to do some things, in fact.
While OPEC does attempt to influence prices, and their effect is mostly at the margins, they have gone both ways historically. That is to say that they have both attempted to raise the price as well as lower the price. Almost everybody in the energy business understands that if runaway prices get too high, it stifles economic activity, and that is ultimately good for no one. But all OPEC can do is beat around the edges.
To think that anyone controls the price of oil and gas is to wholly misunderstand the energy market.
And to think that supply and demand are not an integral part of that market is equally misguided.
I’ve often thought that the above described misconceptions stem from both a failure to grasp some economic fundamentals as well as the apparently widely held perception that the energy business is some kind of monolithic entity with uniform goals that deliver common rewards. It’s not. It’s like any other business with thousands of competing interests.
As well, it’s interesting to note that the price of gasoline is positively cheap if you compare it over 10 or 20 years to any other consumer product. Unadjusted for inflation, the 20 year average price in this country is $1.46/gallon. That’s unadjusted for inflation.