U.S. oil production is on track to hit its highest level since 1992. What has that done to gas prices for consumers? Virtually nothing.
Yet again, analysts are pointing out the obvious: even with massive increases in domestic oil drilling, the impact on gasoline prices is minimal. That’s because oil is a global market and U.S. supplies — even with historic increases — still don’t make a major dent. The Wall Street Journal reports:
U.S. crude production is expected to rise 12% this year and 8% in 2013, when it will hit the highest level since 1993, according to government figures. The price of West Texas crude, the U.S. benchmark, has fallen 7% this year, held down by rising supplies from new drilling methods.So what would happen if we built more pipelines to transport supplies around the country? Surely that would have an impact?
Yet gasoline prices currently average nearly $4 per gallon nationwide. Rising U.S. crude production may seem like an attractive antidote, but it is proving ineffective on its own at a time when the world’s appetite for energy remains voracious and Middle East tension is a reminder that supplies could be disrupted.
“Even the significant increase in U.S. production is a small part of the world oil market,” said Severin Borenstein, co-director of the Energy Institute at the Haas School of Business.
To be sure, unclogging the Midwest bottleneck wouldn’t necessarily have a big impact on retail gasoline prices nationwide, either. Even if far more Midwest oil could get to the wider market, the impact would be “in the pennies. A penny might be it,” said Mr. Borenstein.Experts are saying, well, what experts have been saying for some time. Even if we opened up every inch of the U.S. to oil drilling, there would be minimal downward pressure on gas prices. According to a 2009 report from the Energy Information Administration, an aggressive offshore drilling policy would only lower gasoline prices by about three cents in 2030.
A recent investigation from the Associated Press found “no statistical correlation between how much oil comes out of U.S. wells and the price at the pump” when looking at more than three decades of data. The New York Times and the Wall Street Journal have also reported extensively on the failure of domestic oil drilling to lower gas prices.
However, reality can’t stand in the way of election-season posturing and gimmickry over gas prices. Last month, Americans for Prosperity held swing-state campaign events in which they offered consumers gasoline for $1.84 per gallon. The organization, which is backed by the oil baron Koch Brothers, absurdly claimed it is “Obama’s green energy policies” driving up the price of gas. In fact, we are drilling more oil under the Obama Administration than at any point under the George W. Bush Administration.
The evidence is clear. Despite what the oil industry and other interest groups representing fossil fuels claim, more domestic drilling is doing very little to help consumers.