Drill, Baby, Drill Strategy Won’t Lower Gasoline Prices, Will Enrich Big Oil
This is a good news, bad news story, which the media, characteristically, gets half right.
The AP reports today:
U.S. oil output is surging so fast that the United States could soon overtake Saudi Arabia as the world’s biggest producer. Driven by high prices and new drilling methods, U.S. production of crude and other liquid hydrocarbons is on track to rise 7 percent this year to an average of 10.9 million barrels per day.
This will be the fourth straight year of crude increases and the biggest single-year gain since 1951….
The increase in production hasn’t translated to cheaper gasoline at the pump, and prices are expected to stay relatively high for the next few years because of growing demand for oil in developing nations and political instability in the Middle East and North Africa.
So much for consumers benefiting from Drill, Baby, Drill. But hey, at least America can be #1 again:
The Energy Department forecasts that U.S. production of crude and other liquid hydrocarbons, which includes biofuels, will average 11.4 million barrels per day next year. That would be a record for the U.S. and just below Saudi Arabia’s output of 11.6 million barrels. Citibank forecasts U.S. production could reach 13 million to 15 million barrels per day by 2020, helping to make North America “the new Middle East.”
And lest you were worried that there aren’t enough oil and gas shale plays to cover all our future Dust-Bowlified farm land, the U.S. Energy Information Administration (EIA) has this reassuring chart of North American shale plays, which can be tapped by fracking and horizontal drilling:
You’ll note the extensive overlap with the updated National Center for Atmospheric Research maps of projected Dust-Bowlification if we don’t leave most fossil carbon and virtually all unconventional fuels in the ground:
The Palmer Drought Severity Index (PDSI) in the 2060s and 2090s in a moderate emissions path. A ”reading of -4 or below is considered extreme drought.” The PDSI in the Great Plains during the Dust Bowl apparently spiked very briefly to -6, but otherwise rarely exceeded -3 for the decade (see here).
So who benefits from unrestricted drilling if not U.S. consumers or future generations? The AP notes:
The companies profiting range from independent drillers to large international oil companies such as Royal Dutch Shell, which increasingly see the U.S. as one of the most promising places to drill. ExxonMobil agreed last month to spend $1.6 billion to increase its U.S. oil holdings.
The article ends with the cheerful glass-is-one-tenth-full words of economist Philip Verleger:
“Drivers will have to pay high prices, sure, but at least they’ll have a job.“