If the United States is poised to become the world leader in oil production — or at least a close second — why isn’t that price you’re paying at the pump cheaper?
From Sarah Palin’s “Drill, baby, drill!” to Newt Gingrich’s campaign promise of $2.50 a gallon gas to other less colorful references pushing a need for greater domestic oil production, the implication has been that if America produces more oil, prices at the pump will go down dramatically.
Well, in our area they have slipped under $3.40 a gallon, but that’s still a price level that once was only reached when a hurricane shuttered Gulf oil production and refining. Today, like the proverbial frog in water that is slowly heated to boiling, we have grown accustomed to pump prices rising sharply and then falling to never quite as low as they were before the spike.
According to reports this week, U.S. oil output is expected to rise 7 percent this year, hitting an average of 10.9 million barrels a day, which would be the biggest year-to-year increase in American oil production in six decades. Next year, predictions are the U.S. oil production will hit 11.4 million barrels per day — about 200,000 barrels a day below world leader Saudi Arabia — and some forecasts have the U.S. daily production reaching 13 million-15 million barrels a day within eight years.
That’s a lot of oil, but it’s not enough to make the U.S. energy independent, since our country consumes 18.7 million barrels of oil every day. Still, it has significantly cut our imports of oil to 41 percent of consumption. Just six years ago, three out of every five barrels of oil consumed in the United States were imported.
The U.S. oil, however, isn’t as easy to obtain as it was when massive pools of crude oil were pumped from underground. The rise in the price of a barrel of crude, which was in the $20s a couple of decades ago, to the $90-$100 range (crude was trading at just over $85 a barrel Wednesday) has made the more expensive method of obtaining it from shale cost effective. As long as crude prices stay over $75 a barrel, experts say, domestic oil drilling will continue to grow.
It’s not just U.S. consumption that is being addressed by the refinement of domestically produced crude into petroleum products. Last year, the U.S. exported 2.9 million barrels of petroleum products a day, more than double the 1.2 million barrels a day we exported just six years earlier.
And this is where the themes that have been espoused by domestic-drilling proponents have been misunderstood. Refined oil is going to be sold in the market where it gets the best return, whether that’s here, China, India or anywhere else. Gas pumps with per-gallon prices of $1, $2 or $2.50 just aren’t going to make a comeback, regardless of what pithy saying you hear a politician mutter.
But there is another upside. As oil companies see more promise in drilling in the United States, the investment in people and equipment should have a positive effect on the U.S. economy. The estimated 1.7 million currently employed by the domestic oil industry is projected by IHS CERA, an energy consulting firm, to grow to 3 million by 2020.
The gasoline and other petroleum products that we use are made in America, the more money we circulate domestically and the fewer U.S. dollars we send to other countries for their oil.