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Domestic Drilling Doesn't Decrease Gasoline Prices
eldavojohn writes "As the political rhetoric heats up, there's something puzzling about drilling inside the United States. Essentially, it doesn't reduce what we pay at the pump. From the article, 'A statistical analysis of 36 years of monthly, inflation-adjusted gasoline prices and U.S. domestic oil production by The Associated Press shows no statistical correlation between how much oil comes out of U.S. wells and the price at the pump.' If the promises that politicians made when they opened U.S. drilling were true, then we should be paying about $2 a gallon now. Instead it's $4 a gallon. Minnesota Public Radio pulls some choice quotes from both parties and wonders why this decades-old empirical observation goes seemingly completely unnoticed."
This is the problem when journalists with political agendas pretend to be statisticians. Oil is sold on a global market and goes to many different uses. You cannot look at one part of the supply and say "well, increasing this particular part of the supply didn't affect prices in this other particular market." There are too many other factors to consider: How much oil did other countries use? How much oil was diverted to purposes other than producing gasoline, such as plastics or heating oil? What happened to production in other areas? NONE of this is accounted for in this silly "analysis." Most telling? The analysis excluded the oil shocks of the early 1970's. Why? That was the clearest time that domestic gas prices (and supply) are driven largely by the global oil market. Yet, this analysis is being put into papers all across the US. For what purpose? Could it be to deflect criticism from the Presidents' drilling policies? When an analysis concludes "therefore, the basic laws of economics don't apply," then just like one that says "therefore, the law of gravity doesn't apply," our first instinct should be to question the analysis, not the basic laws.
Drilling domestically might not lower the price of gasoline, but perhaps it creates a buffer in case worldwide oil flows are disrupted. That is, if all oil is imported and there is a boycott against the U. S., we are back to 1973, waiting in gas lines. If a local industry had to begin from scratch, prices would presumably be high for quite a while.
Having at least the ability to drill locally should prevent huge price swings every time there is a panic. The price might rise for a while, but presumably the large oil producing companies would return to the market with slightly lower prices.
Their they're doing there hair.
That was the motto of the communist system. Just in case you weren't making your comment tongue-in-cheek.
But there is an important point hidden there. In politics, you will hear "free markets are GOOD", "central planning is BAD". Or sometimes the reverse (in Europe). People forget that the point is to maximise the goods and services produced, as well as their access from everyone.
If you have no idea what to produce, a market is a good idea. If you know exactly what to produce, a market is an idiotic idea: central planning is the way to go. If you know that this good or service will produce a natural monopoly, you should go for either a tightly regulated market (but due to regulatory capture, this is dangerous) or central planning.
In real life, there are also externalities. Tax accordingly so that your market works better. Yes, taxes are a vital component of making markets work: you want the real price to be reflected, e.g. pollution must be paid for by the polluter.
TL;DR : regulation and taxes on externalities are important. Monopolies should be public. Leave the rest to the market if you don't know what is optimal. If you do, get rid of the market. In the future, robotic overlords will and should plan the economy for us.
Not really, as long as oil is freely traded. If oil spikes from, say, $120 a barrel to $150 a barrel, do you seriously expect US-based producers to turn their back on $30 a barrel extra profit in order to please domestic consumers? They will either export their production or (more likely) expect domestic consumers to pay the market price. It is called the Free Market and the US is supposed to be keen on it. Oil is one of the most transportable, commoditized things around, and the market is world wide.
Consciousness is an illusion caused by an excess of self consciousness.
I think the big thing we need to do is figure out WHY the prices don't come down from domestic drilling. I would bet it doesn't have nearly as much to do with the cost of drilling, and way more to do with the fact that people on Wall Street decide what a barrel of oil is worth, it doesn't matter where it comes from.
It's a global commodity. There is no way that domestic production can change the global price if global production is declining. Globalisation ensures that your suppliers can sell to the highest bidder, and as capitalists, they'd be crazy not to.
Second, it IS expensive to drill in deep water. Not only in immediate costs, but in potential costs of litigation. You have to prepare you nest egg with that in mind. BP certainly convinced everyone in the industry of that fact. You cannot calculate only the immediate profit, but must consider that in the long term the risk of an evironmental catastrophe will hit you, and you can't reduced your profit margin, even if you were so inclined.
The bottom line is, consumers have to get off the drug. The days of free fossil fuel are over anyways (whatever those idealistic economists who obviously still believe in the tooth fairy will tell you). Suck it up, plan in consequence. Give up the macmansion in the suburb and think of a more reasonable lifelstyle. Don't blame others for what YOU can change? Fuel is expensive? Don't buy it.
(I know, we are all affected by indirect cots of other products we can't do without, but we can certainly reduce that impact by changing our behaviour anyways).
I like my dinosaurs feathery, and my pterosaurs hairy (or is it pycnofibery?)
Oil is fungible
It has nothing to do with some grand conspiracy. It's a simple matter of supply and demand. America is competing on the world market for cheap energy. The locality of drilling only determines who gets first sale profits and the quality of the crude. Other than that, the highest bidder gets the oil. Simple as that.
Now personally, I think we should maintain our strategic reserve for times of natural disasters and regional conflict (war). The idea of tapping into it to spook the speculators is flat out wrong. It's also not working anymore. The hedge fund managers are starting to become immune to this political tactic.
Life is not for the lazy.
Who cares if it's a global commodity, the politicians said that home drilling would reduce the price of oil.
It doesn't.
Story: End Of.
We KNOW they were lying, we KNEW at the time they were.
But still it was demanded to be passed because it would reduce prices and help the poor out.
Now that it has been shown to be a load of bollocks, why will you now excuse them for lying about it?