We have been saying for a while that inexorably high energy prices are part of “The Secular Drivers of Inflation.”  The article excerpted below from today’s WSJ affirms our view.  The point is simple.  US Oil companies aren’t going to use excess cash to drill more because their investors want the cash returned to them.  That isn’t going to change, not in the face of the energy transition.  The unprecedented pricing power of the Saudi’s exists not because there isn’t spare US capacity, but because there isn’t really cheap spare capacity.

https://www.wsj.com/business/energy-oil/oil-prices-are-rising-shale-isnt-coming-to-the-rescue-83a672d?mod=hp_lead_pos2

 “Though some analysts say oil prices could soon hit $100 a barrel, U.S. shale companies aren’t rushing to drill more. That means that unlike in past years when frackers flooded the market with crude and alleviated pressure, oil prices might remain elevated until someone else adds production or demand ebbs. In the Permian Basin of New Mexico and West Texas, the most active oil field in the nation, the number of rigs drilling for crude as of last week had declined by about 12% to 314 since the end of April, according to oil field services company Baker Hughes…Most shale companies have vowed to hand over their winnings from high energy prices to investors via share buybacks and dividends. They also face pressure from inflation and high interest rates.”

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