Domestic oil production has little effect on gas prices

Oil Rig

Drilling for more oil will hardly impact gas prices, as domestic oil production is the highest in years. Image from Wikimedia Commons.

Some people think that the panacea for high gas prices at the pump is to produce more oil here in the United States. Though it seems expedient, the fact is that domestic oil production is the highest its been in years.

Myriad reasons for gas prices

Many, especially political candidates on the campaign trail, espouse the notion that increasing domestic oil production is the cure-all. If we just drill more here, the price of gas will come down. However, according to CBS, a statistical analysis by the Associated Press has found that domestic oil production doesn’t have much to do with gas prices.

Domestic oil production since early 2009 has increased by 15 percent. However, gas and oil prices have been fluctuating wildly, hitting record highs several times, going from $2.07 to more than $3.58. Current domestic oil production is around the same level as 2003, yet gas does not cost $2.10 per gallon.

Importing less

The United States uses more than 20 percent of the world’s oil, according to CNN. However, according to the Department of Energy, oil imports accounted for 45 percent of the supply of oil in 2011. In 2010, oil imports fell below 50 percent for the first time since the late 1990s; in 2006, it was 60 percent. Gas prices are rising in spite of increased domestic production.

Furthermore, according to CBS, the AP found that the increased supply of oil from the Keystone pipeline would account for about 25 million barrels of oil per month. Between February and November 2011, that much more was produced anyway and gas prices rose by 10 cents.

[High gas prices can still practically force one to get personal installment loans]

The AP also found that in previous periods, the price of gas would actually fall when production dipped. In 1986, gas prices dipped below $2 per gallon, adjusted for inflation, and did not rise above $2 per gallon until 1999. In that time period, domestic gas production dropped by one-third. In other words, prices dropped along with production from 1986 to 1999 and from 2009 to 2012, rose along with production.

Already a large producer

The issue is not likely with oil supply. The U.S., according to the CIA World Factbook, is the third-largest oil producer with an estimated output of 9.688 billion barrels in 2010, behind Russia and Saudi Arabia.

However, according to Daily Finance, Americans were the single greatest users of oil, consuming 18.8 million barrels per day in early 2011. That is more than the top four consumers below American consumption combined.

Sources

CBS

Department of Energy

Daily Finance

CIA World Factbook: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2173rank.html

CNN: http://www.cnn.com/2012/03/22/politics/obama-energy-tour/index.html

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