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CBO Report: Boosting Oil Production Won’t Protect Americans From Gasoline Price Shocks

By Stephen Lacey  

"CBO Report: Boosting Oil Production Won’t Protect Americans From Gasoline Price Shocks"

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More domestic drilling does not make America less susceptible to global supply disruptions or protect consumers from gasoline price volatility, according to a new analysis from the Congressional Budget Office.

The CBO report reviewed different policies intended to make the country more energy secure, concluding that the only effective tool for shielding businesses and consumers from price spikes is to use less oil.

Because oil is sold on the global market, CBO concludes that increasing domestic oil production would do little to influence rising gas prices in the U.S.

These findings back up historical experience. According to an analysis of 36 years of gasoline prices and domestic oil production conducted by the Associated Press, there is zero statistical correlation between increased drilling and lower prices at the gas pump.

The CBO report creates a dilemma for drilling proponents. Even if increased drilling did substantially lower gas prices — which it has not –  the agency says those lower prices would actually make the country less secure from price shocks:

Policies that promoted greater production of oil in the United States would probably not protect U.S. consumers from sudden worldwide increases in oil prices stemming from supply disruptions elsewhere in the world, even if increased production lowered the world price of oil on an ongoing basis. In fact, such lower prices would encourage greater use of oil, thus making consumers more vulnerable to increases in oil prices. Even if the United States increased production and became a net exporter of oil, U.S. consumers would still be exposed to gasoline prices that rose and fell in response to disruptions around the world.

In contrast, policies that reduced the use of oil and its products would create an incentive for consumers to use less oil or make decisions that reduced their exposure to higher oil prices in the future, such as purchasing more fuel-efficient vehicles or living closer to work. Such policies would impose costs on vehicle users (in the case of fuel taxes or fuel-efficiency requirements) or taxpayers (in the case of subsidies for alternative fuels or for new vehicle technologies). But the resulting decisions would make consumers less vulnerable to increases in oil prices.

The solution is clear: the only way to make America more energy secure is to use less energy.

Even Mitt Romney understood this in 2007 when he admitted that “these high gasoline prices are probably here to stay” and advocated 50-mpg fuel efficiency standards, public transportation, electric vehicles, and renewable alternatives.

However, today, Romney champions opening up virtually every possible area of the U.S. to oil drilling — disingenuously claiming it will make consumers more secure.

“The best thing we can do to get the price of gas to be more moderate and not have to be dependent upon the cartel is: drill in the gulf, drill in the outer continent shelf, drill in ANWR, drill in North Dakota, South Dakota, drill in Oklahoma and Texas,” Romney said at a recent campaign stop.

Even as the analysis piles up showing that increased domestic drilling is not an effective solution to high gas prices or energy security, political leaders continue to repeat these false claims.

We need creative, proven ideas to help us make America more efficient and less dependent on oil — not a hollow Drill-Baby-Drill mantra that does nothing to address the problem.

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9 Responses to CBO Report: Boosting Oil Production Won’t Protect Americans From Gasoline Price Shocks

  1. wili says:

    –the US has just had its hottest 12 month period in its history.
    –Records continue to fall at a record pace around the world.
    –Masters and others are pointing out that stalled fronts–which lead to longer periods of hot [i]and[/i] cold–are clearly linked to the fact that a very rapidly warming Arctic means a reduced difference between polar and equatorial temps, and so slows the jet stream and makes it more ‘loopy.’

    But is the response a global ‘call to arms’ recognizing this as an existential threat to all of human society and to life itself?

    Hardly.

    Instead, we are UNsequestering carbon at the fastest, most frenetic pace in history–at a rate of about ten billion tons a year (which adds up to about 35 tons of CO2 per year). (If anyone sees any sign of voluntary reductions in the extraction of fossil fuels, please do let me know.)

    It is like someone playing Russian roulette and adding more bullets into the chamber at every opportunity they get.

    Why is our global industrial civilization so very suicidal and terra-cidal?

    Meanwhile, there is a new update on Arctic methane from the AIRS data.

    ftp://asl.umbc.edu/pub/yurganov/methane/MAPS/NH/ARCTpolar2012.04._AIRS_CH4_400.jpg

    It still doesn’t look like much reduction over the top of the Arctic at a time when sun, which should be busily destroying methane, is drenching the region 24/7.

    • Mulga Mumblebrain says:

      It is not ‘we’ who are destroying the planet’s climate stability and suitability as a habitat for our species, but ‘Them’, the Rightwing genocidaires who have always, since we climbed out of the primordial slime, preferred money and power to their fellows.

  2. BBHY says:

    “The CBO report creates a dilemma for drilling proponents.”

    Well no, it does not. Those folks disregard logic and reason, so this report does not affect them.

  3. M Tucker says:

    I agree with BBHY. The only dilemma drilling proponents have is when will the federal government open ANWR.

    As is said in the graph, “No country is independent of the world oil market.”

    Our only salvation is to stop using the stuff. Even if you use less you would still be subject to price swings. The financial impact would be less.

    Our dependence on crude not only contributes to climate disruption and ocean acidification but also significantly contributes to the large trade imbalance the US runs.

  4. Morgan Vening says:

    To add to the “No country is independent of the world oil market.” comment, the only way a county CAN become independent of the world oil market, is to nationalize oil production and distribution, and socialize the retail. Because as long as free markets have a say, product generally goes to the highest bidder.

    • Mulga Mumblebrain says:

      Well said Morgan-absolutely true. Capitalism is radically inimical to continued human existence on this planet. Unfortunately humanity is brainwashed from birth in believing that there is no alternative to capitalism, and the MSM propaganda apparatchiki know that a single sentence, word, hesitation, or relative lack of enthusiasm in praising capitalism and deriding and vilifying all alternatives is career-ending. By the time sufficient people awaken )if that ever occurs)it will be decades too late.

  5. Joe Bickner says:

    Let’s face it: with global competition, developing country, and the world slowly running out of oil, no amount of drilling will reduce prices.

  6. Makan says:

    This is timely analysis as a new IMF paper predicts that oil prices will double in the next 10 years.

    http://www.energybulletin.net/stories/2012-05-08/new-imf-working-paper-models-impact-oil-limits-economy