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Why the concept of drilling to bring down oil prices is fallacy
Topic Started: Feb 27 2012, 11:56 PM (674 Views)
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Globe & Mail business


Drilling alone won’t bring cheap U.S. oil
CHRISTOPHER SWANN
Reuters
Published Sunday, Feb. 26, 2012 7:00PM EST
Last updated Monday, Feb. 27, 2012 6:53AM EST

Republican presidential hopefuls are presenting the U.S. public with a familiar fantasy: By expanding offshore drilling they can bring gasoline prices back to earth. With the U.S. pumping only 9 per cent of global crude, its leverage on supply is modest. But the world’s biggest consumer can affect demand, the other determinant of price. That, however, requires frank talk about conservation.

Americans get restive as pump prices rise toward $4 (U.S.) a gallon. Chastising President Barack Obama, and pledging to cut prices back to $2.50 a gallon, as Newt Gingrich has done, is standard political salesmanship. It’s also economic hubris. The United States pumps just 7.5 million barrels of the world’s 82 million barrels a day of crude, according to BP. One nation can’t control world prices with such a modest market share.

Even if the United States were to throw environmental caution to the winds and open up areas currently out of bounds to producers, the extra output could be offset by oil cartel OPEC. Swing producers, most notably Saudi Arabia, might swiftly reverse the effect of years of extra American drilling if they were unhappy with the resulting oil price.

It is also hard for Republicans to argue that the United States is failing to exploit its own oil. Oil output has been rising for the first time since the 1970s – thanks to enthusiastic deep-sea drilling and surging output from shale regions in North Dakota, Texas and elsewhere. The result is that reliance on foreign oil has fallen below 50 per cent, back to levels last seen three decades ago. None of this, however, has stopped the price of Brent from rising 60 per cent over the past two years.

The United States’ real clout on global energy markets comes as a consumer, where it accounts for a fifth of all oil burnt. There is plenty of low-hanging fruit, here. The average fuel efficiency of the U.S. vehicle fleet is about half that of European nations. And federal taxes on gasoline, which are the most effective means of curbing usage and fostering efficiency, are correspondingly lower.

A plea for conservation is unlikely to appeal to voters of any political persuasion. But the economic laws of supply and demand are pretty simple. And they make a strong case for focusing on the latter over the former. In an election year, however, don’t expect reason to triumph over populism.



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tomdrobin
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Blaming Obama's policies for high oil prices of course is disingenous. But, the GOP will say or do anything to get back in power.
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Stirring up the gas price issue is good strategy for them. No one may have noticed the link in that article that predicts $150 a barrel if Israel attacks Iran.
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Jim Miller
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I wonder why Tom doesn't chastise Obama for all the lies he told to get his ass elected.
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What does that (assuming there is any validity in that statement) have to do with oil prices?
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Jim Miller
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tomdrobin
Feb 28 2012, 12:00 AM
But, the GOP will say or do anything to get back in power.
See if you can figure it out, Paul.
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Sorry, you lost me
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Jim Miller
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No surprise there.
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tomdrobin
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Jim Miller
Feb 28 2012, 12:30 AM
I wonder why Tom doesn't chastise Obama for all the lies he told to get his ass elected.
The only one's that believe that Obama had any more lies and distortions than any other politicians are the right wing sheeple. Speaking of lies, the current crop of GOP presidential candidates are the biggest liars yet, if you want to consider flip flopping as lying. From pro choice to ardent pro life, from advocating universal health care to condemming it, from big spender in congress to calling for a balanced budget. These guys are tripping over themselves to see who can get the most conservative label, to please the sheeple who have been brainwashed by Fox and other right wing propoganda outlets.
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Jim Miller
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Thanks for proving my point, Tom.
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