The Failure Of ‘Drill, Baby, Drill': Wall Street Journal Reports ‘Oil Boom Providing Little Relief For Consumers’

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"The Failure Of ‘Drill, Baby, Drill': Wall Street Journal Reports ‘Oil Boom Providing Little Relief For Consumers’"

U.S. oil production is on track to hit its highest level since 1993. 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.

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.

So what would happen if we built more pipelines to transport supplies around the country? Surely that would have an impact?

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 the price of a gallon of gasoline 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.┬áIn 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.

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5 Responses to The Failure Of ‘Drill, Baby, Drill': Wall Street Journal Reports ‘Oil Boom Providing Little Relief For Consumers’

  1. Mulga Mumblebrain says:

    All this new oil is easy to get, Jed Clampett shooting up some crude kinda stuff, right? Dig a hole and she’s a gusher. I’d love to know the average Energy Return on Energy Invested these days, and the quarterly profits of the oil majors are, no doubt, immensely gratifying for the deserving rich.

  2. Earl Richards says:

    If oil drilling is up, then, why doesn’t the oil price dropped?

  3. Todd says:

    The only relief obtainable for high oil and gasoline prices is demand destruction. It is happening today in the USA and other places. Italy raised fuel taxes and has seen fuel consumption fall by 20% in two years! Every time I read about new car models there is another super-efficient motor or drivetrain being offered. EV sales in Norway reached 5% of all new-car sales this year. Europe is witnessing an explosion of electric bicycle sales, approaching 1 million/year, and they are getting used daily, many by people who have not ridden a bike in years. Motorcycles and scooters instead of cars. More public transportation, etc. Even premium cars are offering high fuel efficiency options. The momentum of this will only increase, and soon demand will be much lower than today. Oil producers know this and what happened in 1986 when a similar process culminated after 10 years of increasing fuel efficiency in transport accumulated.

  4. 1watt says:

    Wonder if there’s a report on the amount of oil and gasoline that is owned by the banksters.
    Years ago the world contango was enormous.

  5. Uncle B says:

    It takes a very “Special” kind of thinking to feel u.S. Oil finds would go for anything less than the current world price for oil!