Want lower gas prices? Drill, Baby Drill! Or Not.

[kramerfan86]

"real" democracy of course meaning the Iranian people choose the "correct" leaders unlike the last time they had democracy and we had to liberate them from their foolishness.

 

[BasketCase]

I'm not convinced these kinds of sanctions will do that, but we can hope.

Definitely doing that myself.

Though I favor a shooting war with Iran, I know that outside of airstrikes by Israel, the shooties aren't likely to happen.

"real" democracy of course meaning the Iranian people choose the "correct" leaders

And, what was the rest of the world's reaction when we Americans chose George Bush Jr.?

Gotcha.

In any case, war with Iran isn't the oil industry's doing. Oil companies like peace and security. And dictators. Oil companies love dictators.

 

[Leoreth]

And, what was the rest of the world's reaction when we Americans chose George Bush Jr.?

a) You didn't (the first time), your election system is just too malfunctioning to realize this.
b) Nobody ever seriously wants to take democracy away from you just because you like to elect Texan imbeciles every now and then.

And what crappy kind of argument is "others did it, too!" to begin with?

Yeah, but as long as you get your zings and gotchas

 

[kochman]

a) You didn't (the first time), your election system is just too malfunctioning to realize this.
b) Nobody ever seriously wants to take democracy away from you just because you like to elect Texan imbeciles every now and then.

And what crappy kind of argument is "others did it, too!" to begin with?

Yeah, but as long as you get your zings and gotchas

Yeah, GWB and LBJ... we're good on texans for a while... agreed.

 

[FriendlyFire]

And, what was the rest of the world's reaction when we Americans chose George Bush Jr.?

Gotcha.

The US are very happy with W.Bush and hes eight years. Which is why he is very popular and fondly remembered.

Anyways interesting chart

 

[kochman]

The US are very happy with W.Bush and hes eight years. Which is why he is very popular and fondly remembered.

Anyways interesting chart

The chart is useless, because it only considers US production, not world production.
If we produce more, OPEC lowers output to keep prices high.

However, we still benefit, because WE are selling the oil, rather than them.

 

[Antilogic]

And, what was the rest of the world's reaction when we Americans chose George Bush Jr.?

Gotcha.

In any case, war with Iran isn't the oil industry's doing. Oil companies like peace and security. And dictators. Oil companies love dictators.

Yeah, but as long as you get your zings and gotchas

Side question: how is this a "gotcha" moment?

The chart is useless, because it only considers US production, not world production.
If we produce more, OPEC lowers output to keep prices high.

However, we still benefit, because WE are selling the oil, rather than them.

And they wouldn't do the same now so that gas prices go relatively unaffected? I'm also concerned by your use of the word "we" here, but that's another story.

 

[Eat_Up_Martha]

The chart is useless, because it only considers US production, not world production.
If we produce more, OPEC lowers output to keep prices high.

However, we still benefit, because WE are selling the oil, rather than them.

It doesn't measure production at all. It only shows operating oil rigs. A more useful chart would display actual volume.

If oil prices continue to rise (and why wouldn't they?) it would be more beneficial to keep your oil under the ground now and pay for the cheaper foreign oil.

 

[Arwon]

The chart is useless, because it only considers US production, not world production.
If we produce more, OPEC lowers output to keep prices high.

However, we still benefit, because WE are selling the oil, rather than them.

Who is "we" here?

 

[kochman]

Usa #1

 

[History_Buff]

You do realize though, that the companies selling that oil are paying very little in the way of income tax, and creating relatively few jobs for Americans?

 

[Millman]

Who says you have to use gas?

Ignoring my post doesn't encourage me to reply.

 

[El_Machinae]

You do realize though, that the companies selling that oil are paying very little in the way of income tax, and creating relatively few jobs for Americans?

Even if true, there's economic leverage wherever shareholders are being rewarded for their investment holdings. A retiree who has more income is better off.

 

[Kaitzilla]

We’ve all heard it. The common sense solution to lowering gas prices is to drill for more oil and increase production. Turns out that there is no statistical correlation between domestic oil production and the price at the pump (shocking, I know):

Spoiler :

WASHINGTON (AP) -- It's the political cure-all for high gas prices: Drill here, drill now. But more U.S. drilling has not changed how deeply the gas pump drills into your wallet, math and history show.

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 more domestic oil drilling worked as politicians say, you'd now be paying about $2 a gallon for gasoline. Instead, you're paying the highest prices ever for March.

Political rhetoric about the blame over gas prices and the power to change them - whether Republican claims now or Democrats' charges four years ago - is not supported by cold, hard figures. And that's especially true about oil drilling in the U.S. More oil production in the United States does not mean consistently lower prices at the pump.

Sometimes prices increase as American drilling ramps up. That's what has happened in the past three years. Since February 2009, U.S. oil production has increased 15 percent when seasonally adjusted. Prices in those three years went from $2.07 per gallon to $3.58. It was a case of drilling more and paying much more.

U.S. oil production is back to the same level it was in March 2003, when gas cost $2.10 per gallon when adjusted for inflation. But that's not what prices are now.

That's because oil is a global commodity and U.S. production has only a tiny influence on supply. Factors far beyond the control of a nation or a president dictate the price of gasoline.

When you put the inflation-adjusted price of gas on the same chart as U.S. oil production since 1976, the numbers sometimes go in the same direction, sometimes in opposite directions. If drilling for more oil meant lower prices, the lines on the chart would consistently go in opposite directions. A basic statistical measure of correlation found no link between the two, and outside statistical experts confirmed those calculations.

"Drill, baby, drill has nothing to do with it," said Judith Dwarkin, chief energy economist at ITG investment research. Two other energy economists said the same thing and experts in the field have been making that observation for decades.

The statistics directly contradict the title of GOP presidential candidate Newt Gingrich's 2008 book "Drill Here, Drill Now, Pay Less," as well as the campaign-trail claims from the GOP presidential candidates.

Earlier this month, GOP front-runner Mitt Romney said of his solution to higher gas prices: "I can cut through the baloney ... and just tell him, `Mr. President, open up drilling in the Gulf, open up drilling in ANWR (the Arctic National Wildlife Refuge). Open up drilling in continental shelf, drill in North Dakota, drill in Oklahoma and Texas.'"

On Wednesday, with President Barack Obama traveling to oil and gas production fields on federal lands, Crossroads GPS, a nonprofit arm of a super PAC supporting GOP candidates, released a new ad to air in the same states that Obama was visiting. It accused Obama of restricting oil development in America and concludes "bad energy policies mean energy prices we can't afford."

The late 1980s and 1990s show exactly how domestic drilling is not related to gas prices.

Seasonally adjusted U.S. oil production dropped steadily from February 1986 until three years ago. But starting in March 1986, inflation-adjusted gas prices fell below the $2-a-gallon mark and stayed there for most of the rest of the 1980s and 1990s. Production between 1986 and 1999 dropped by nearly one-third. If the drill-now theory were correct, prices should have soared. Instead they went down by nearly a dollar.

The AP analysis used Energy Department figures for regular unleaded gas prices adjusted for inflation to 2012 dollars, oil production and oil demand. The figures go back to January 1976, the earliest the Energy Department keeps figures on unleaded gas prices. Phil Hanser, an economist and statistician at the energy consulting firm The Brattle Group; University of South Carolina statistics professor John Grego; New York University statistics professor Edward Melnick and David Peterson, a retired Duke University statistics professor, looked at the analysis, ran their own calculations, including several complicated formulas, and came to the same conclusion.

When U.S. production goes up, the price of gas "is certainly not going down," Melnick said. "The data does not suggest that whatsoever."

The calculations "help make the point that U.S. production and demand have little to do with the price of gasoline in the U.S., and lend support to the notion that there is not a great deal we in the U.S., acting alone, can do to affect the price of gasoline," Peterson wrote in an email. He pointed out that Energy Department figures show that gas prices in the U.S. seem to rise and fall similarly to gas prices in Europe, showing that it has little to do with American drilling.

And that's the key. It's a world market, economists say.

Unlike natural gas or electricity, the United States alone does not have the power to change the supply-and-demand equation in the world oil market, said Christopher Knittel, a professor of energy economics at MIT. American oil production is about 11 percent of the world's output, so even if the U.S. were to increase its oil production by 50 percent - that is more than drilling in the Arctic, increased public-lands and offshore drilling, and the Canadian pipeline would provide - it would at most cut gas prices by 10 percent.

"There are not many markets where the United States can't impose its will on market outcomes," Knittel said. "This is one we can't, and it's hard for the average American to understand that and it's easy for politicians to feed off that."

If drilling activity rises around the globe for a sustained period of time, gasoline prices can fall as that new supply eventually finds its way to market, but the U.S. can't do it alone, oil analysts say.

Politicians - especially those in the party that's not occupying the White House - have long harped on high gas prices when expedient. Then-Sen. Barack Obama said in 2008, when he was running for president, that "here in Ohio, you're paying nearly $3.70 a gallon for gas, 2-1/2 times what it cost when George Bush took office."

But Obama, who has seen gas prices go up 73 percent since he took office, was singing a different tune last week in his weekly radio address: "The truth is: The price of gas depends on a lot of factors that are often beyond our control. Unrest in the Middle East can tighten global oil supply. Growing nations like China or India adding cars to the road increases demand. But one thing we should control is fraud and manipulation that can cause prices to spike even further."

The political party of the president doesn't seem to matter to the price at the pump either. Since 1976, the average monthly gas price, adjusted for inflation, during Democratic presidencies has been $2.25; under Republicans it's been $2.34. Obama had the steepest monthly average at $3.05 and Bill Clinton the cheapest at $1.68.

When Bush and running mate Dick Cheney campaigned in 2000, they argued that as oil executives they could get oil prices down, with Bush saying, `'I would work with our friends in OPEC to convince them to open up the spigot, to increase the supply."

Yet it was during the last few months of Bush's term in 2008 that gas prices hit their highest: $4.27 when adjusted for inflation.

http://hosted.ap.org/dynamic/storie...ME&TEMPLATE=DEFAULT&CTIME=2012-03-21-15-00-49

So how long before the GOP stops using Drill, Baby Drill as a silver bullet solution for the woes at the pump?

It's been 2 years now and I think it is safe to say that all the Democrats/Liberals who said we could never lower oil prices by drilling more in the USA were wrong.
http://www.telegraph.co.uk/finance/...in-shale-price-showdown-as-crude-crashes.html

Saudi Arabia and the core Opec states are taking an immense political gamble by letting crude oil prices crash to $66 a barrel, if their aim is to shake out the weakest shale producers in the US. A deep slump in prices might equally heighten geostrategic turmoil across the broader Middle East and boomerang against the Gulf’s petro-sheikhdoms before it inflicts a knock-out blow on US rivals.

Caliphate leader Abu Bakr al-Baghdadi has already opened a “second front” in North Africa, targeting Algeria and Libya – two states that live off energy exports – as well as Egypt and the Sahel as far as northern Nigeria. “The resilience of US shale may prove greater than the resilience of Opec,” said Alistair Newton, head of political risk at Nomura.

Chris Skrebowski, former editor of Petroleum Review, said the Saudis want to cut the annual growth rate of US shale output from 1m barrels per day (bpd) to 500,000 bpd to bring the market closer to balance. “They want to unnerve the shale oil model and undermine financial confidence, but they won’t stop the growth altogether,” he said.

There is no question that the US has entirely changed the global energy landscape and poses an existential threat to Opec. America has cut its net oil imports by 8.7m bpd since 2006, equal to the combined oil exports of Saudi Arabia and Nigeria.

The country had a trade deficit of $354bn in oil and gas as recently as 2011. Citigroup said this will return to balance by 2018, one of the most extraordinary turnarounds in modern economic history.

“When it comes to crude and other hydrocarbons, the US is bursting at the seams,” said Edward Morse, Citigroup’s commodities chief. “This situation is unlikely to stop, even if prevailing prices for oil fall significantly. The US should become a net exporter of crude oil and petroleum products combined by 2019, if not 2018.”

Opec has misjudged the threat. As late as last year, it was dismissing US shale as a flash in the pan. Abdalla El-Badri, the group’s secretary-general, still insists that half of all US shale output is vulnerable below $85.

This is bravado. US producers have locked in higher prices through derivatives contracts. Noble Energy and Devon Energy have both hedged over three-quarters of their output for 2015.

Pioneer Natural Resources said it has options through 2016 covering two- thirds of its likely production. “We can produce down to $50 a barrel,” said Harold Hamm, from Continental Resources. The International Energy Agency said most of North Dakota’s vast Bakken field “remains profitable at or below $42 per barrel. The break-even price in McKenzie County, the most productive county in the state, is only $28 per barrel.”

USA #1!
I necro'd this thread so we can all read 9 pages of how wrong everyone was.

 

[Arwon]

I dunno, I'm pretty happy with my excellent contributions to this thread.

 

[Zelig]

Taking into account gas prices, vehicle fuel economy, inflation and my purchasing power, gas costs per distance to me are an order of magnitude less than when I started driving a decade ago. Even without taking my purchasing power into account, gas costs are less than 2/3 what they were a decade ago.

edit: Had 1/2 instead of 2/3, but seems my current car is actually rated worse than my 20 year-old car was for fuel efficiency... pretty sure this is more of a rating change than an actual worsening in economy, but I don't confidently recall what my real fuel economy was in the past...

 

[Timsup2nothin]

WOW!!!

Look at that gas price dip in 08!!!!

Clearly crashing the economy is far more effective and efficient than this drill baby drill business.

 

[Bootstoots]

The ramp-up in US oil production over the last three years has been truly impressive. However, low oil prices are toxic to producers of oil that is more expensive to extract (including unconventional sources like shale oil). The companies that are behind most of the shale oil extraction have had expenses far in excess of revenues for quite a while even though oil prices were in the $100/bbl neighborhood until recently. And they are forced to keep drilling at a rapid pace by the enormous decline rates in shale wells (>50% in the first year, less but still bad after that). I don't see how they can keep going for long at $60-70/bbl.

As far as I can tell that's more or less what Saudi Arabia and other Gulf states have in mind: they still have enough conventional oil remaining that they can refuse to cut production, sell at lower prices than their competitors can afford (US and Canadian unconventional oil, Russia, other OPEC states including Iran and Venezuela, and so forth) and gain a competitive advantage worth more than the extra revenue they're forgoing. Of course weaknesses in emerging markets, the Eurozone, and Japan are keeping demand low too.

Anyway, enjoy the low oil prices while they last! Of course if they last very long that'll probably be more a sign of global economic weakness than anything positive.

 

[Cutlass]

Demand also matters to price. Not just supply. And demand has been slack.

 

[Bootstoots]

Of course. I didn't say it explicitly but that's why I said that persistently low prices are probably more a sign of global economic weakness than anything else. Lower demand could also be caused by greater efficiency in oil use and renewable energy development, but that's much more of a long-term trend that wouldn't be very obvious on short time scales.