It’s an all-too-common belief that if only we had authorized more domestic development of oil, our gasoline prices would be lower.
Even though we are the proverbial 8,000 pound gorilla, consuming about one-quarter of the world’s energy, oil prices are not all about us. The increasing consumption of countries in Asia, South America, Russia, and the Middle East have more than made up for the slight declines in petroleum consumption we have experienced this year. Global consumption is expected to increase another 1 mbpd this year, even as consumption declines in the U.S.
The fact is that oil is a globally traded commodity. Since the U.S. imports two-thirds of the oil it consumes, the price of domestic oil will always maintain parity with global prices. Therefore, no matter how much we drill up the remaining resources, it will not significantly change the price of fuel.
With the global supply and demand balance as tight as it is for oil, natural gas, and coal, it is highly unlikely that a slight increase in U.S. production could make any noticeable difference in our gasoline prices.
From a lengthy piece about “peak oil” at The Oil Drum by Chris Nelder, author of Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century.
Another interesting point: Many oil fields are depleting; that is, their production is decreasing. Any new oil fields must make up this decrease before there is a net gain. Currently net growth of production is 1% a year. Demand is up 1.5% a year. Do the math.
Print This Post
1 Comment
