Another Industry Talking Point Laid To Rest: Oil Production Soars But Gas Prices Remain High

Tue, 2012-01-24 15:11Farron Cousins
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Another Industry Talking Point Laid To Rest: Oil Production Soars But Gas Prices Remain High

It is hard to believe that it's been almost four years since Americans were bombarded by the cry of “Drill baby, drill” that echoed throughout the halls of the Republican National Convention in 2008. That slogan became a rallying cry for conservatives who believed that increasing oil drilling – in spite of the environmental costs – would lead to an economic boom in the United States, and would also help ease prices at the pump for American consumers.

So today, nearly four years after those words were uttered to millions of conservatives, we have domestic oil production reaching a 24-year high, according to new reports. By industry and conservative logic, this should also mean that economic productivity has risen while consumer gasoline prices have fallen. But nothing could be further from the truth.

It turns out that increased oil production has nothing to do with the prices Americans pay at the pump. While industry leaders point to increased production in 2008 that was followed by lower prices, experts counter that the drop in price was due to simple market fluctuations: specifically, a drop in demand due to the global recession.

People travelled less and therefore didn’t use as much gasoline, creating a surplus that companies had to expel by lowering prices. These same experts also say that a rise in renewable energy use contributed to lower fossil fuel prices during this time period.


The truth is that the United States just doesn’t have enough fossil fuels to bring down the price of energy for American consumers. Even with our current rise in domestic fossil fuel production, prices continue to rise or remain steady without any signs of falling. The reason for this is because OPEC sets oil prices on the international stage.

When the United States increases their oil production, those figures are sent to OPEC, who then adjust the global price of oil based on our own production. Experts say that opening up all of our available areas to drilling, once factored into OPEC equations, would only reduce gasoline prices by a mere three cents per gallon, and that price drop would only last a few years.

Interestingly enough, industry leaders are still beating the (oil) drum for increased drilling and domestic oil production, even as oilrigs are sprouting up across the country, to almost no one’s benefit except the oil companies. And they are being aided along the way with their allies from conservative think tanks, conservative media, and Republican politicians.

In fact, Republicans in Congress have been so eager to open up new lands for drilling – again, in spite of the fact that drilling is occurring at a record pace – that they held 20 hearings on ways to speed up the permitting and drilling process in the last year. This was during a year where oil drilling had increased a staggering 60% since the previous year. (Think Progress has a chart showing the dirty energy industry campaign donations that went to the politicians holding these meetings.)

Even today, the U.S. Chamber of Commerce continues to urge President Obama to “#getserious” about domestic energy production by increasing the lands available for energy industry exploitation.

As mentioned above, there are two factors that have been proven to lower fuel prices – economic recession and replacing fossil fuels with renewable energy. And both of those factors work the same way, which is to decrease the demand for fossil fuels. Until demand falls, the industry has absolutely no reason to lower prices. In fact, the companies are legally required to do all that they can to protect their profits and the “best interest” of their shareholders, so lowering prices because of increased production is not even an option that is on the table.

It is doubtful that the industry, and those with financial or political ties to the dirty energy industry, will ever concede the fact that increased oil drilling will not lower energy prices. But the facts are not on their side, so no matter how often they repeat those talking points they will never be truthful.

Previous Comments

FYI, in his state of the union address tonight, Obama promised to develop ‘Shale’ gas.

“We have a supply of natural gas that can last America nearly one hundred years, and my Administration will take every possible action to safely develop this energy.  Experts believe this will support more than 600,000 jobs by the end of the decade.  And I’m requiring all companies that drill for gas on public lands to disclose the chemicals they use.  America will develop this resource without putting the health and safety of our citizens at risk.”

I doubt if another ‘XL’ style protest in Washington can stop this from happening. =\  There is way too much demand for energy to stop the inevitable.

“There is way too much demand for energy to stop the inevitable.”

Not for US consumption. There is a glut.  More gas = more export.

Those LNG ports are giant compressors to sell this stuff elsewhere.

http://www.lnglawblog.com/?gclid=CMmziLzP660CFWcbQgod8A9O7Q

EIA Expects United States to Become Net LNG Exporter by 2016
January 24, 2012

Speaking to an audience in Washington, D.C., Acting Administrator Howard Gruenspecht of the U.S. Energy Information Administration (EIA) predicted that the United States will become a net LNG exporter by 2016. According to Bloomberg, Gruenspecht noted that domestic natural gas supply is growing faster than demand and that the surplus will likely be exported to Mexico and overseas.

[x]

Two oil companies planning to drill in remote Arctic waters, Shell and ConocoPhillips, are pleading with U.S. regulators not to make them follow new guidelines proposed by the Interior Department that would require the companies to keep emergency spill response equipment close at hand and prohibit the use of chemical dispersants.

The precise details of the new rules for Arctic drilling operations have not been made public as an inter-agency review of the Interior Department's proposal is still being carried out.

But records of meetings...

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