Is domestic drilling only worth $0.03 per gallon?

Does the government have a crystal ball when it comes to forecasting oil prices?

Opponents of offshore drilling claim that such activity would possibly only decrease gas prices by $0.03 per gallon by 2030. That 3-cents figure comes from the Energy Information Administration’s Annual Energy Outlook report.

How credible is this forecast?

Consider the EIA’s 2001 Annual Energy Outlook in which the “high end” price of oil in 2020 is forecast to be $28.42 (See Table 1).

We’re not holding our breath for that one, just like we don’t have much faith in government prognostications about the impact of increased domestic oil production 20 years in the future.

We should explore and drill offshore because it makes to develop our own natural resources — and to ignore gooberment forecasts which are likely to be wrong.

10 thoughts on “Is domestic drilling only worth $0.03 per gallon?”

  1. One factor that seems to be overlooked by many, is even if we increase domestic production, without increased refining capacity to go with it, we would still see high gas prices. Oil gets all of the publicity, but gasoline is sold on the market as well, and the fact that refineries are at capacity and there are no new facilities being planned, means we could produce a million barrels more but produce no additional gasoline. You have a multi-headed monster here folks.

  2. As gas prices continue to go up, so will the efficiency of new cars and an increasing use of electric cars – both of which will reduce local demand for oil (but likely not world). Electricity for electric cars can be generated from coal, natural gas, or nuclear sources. More fleet vehicles will also be converted to natural gas because it is now so plentiful.

    Therefore, having a reasonable policy on energy which would include increasing local supplies of oil will have a larger effect than we might think based on today’s use.

    If nothing else, as someone else has suggested, it helps to control speculation because a larger percent of our oil would be local and therefore secure.

  3. Seems to me, if drilling is done locally, then all the money is kept in circulation at home, more domestic taxes is collected on the process and on the people necessary to make it happen. This domestic increase in tax revenue plus the prospect of off setting the trade deficit would come at the cost of .03 a barrel. Sounds like a bargain to me.

  4. The amount of oil and natural gas in the earth’s crust no one really knows but because of the advancments in drilling, fracking there is no shortage in the near future even with the demand increase. The cost to drill, case, frac, complete, refine and distribution of the natural resource ( oil& natural gas) does not go up and down in price as the price per barrel of oil and 1000 cubic ft. of natural gas does. The oil industry has a monopoly over the world’s users but natural gas it not so yet. America has plenty of its own natural resources to control the costs per barrel, its a matter just to drill in a responsible way and provide at a fair profit so the oil and gas exploration can continue to advance in methods in the drilling for natural gas and oil. Any industry should make a fair profit but not at the expense of ones standard of living.

  5. You made the same mistake that most of the greenies do that pulled that 3 cents out of their bung hole. Yes, the price of gas is set on the world stage. but the factors affecting it are many. And one is confidence in the supply. The price shot up when Libya went into turmoil, even though if the entire supply of Libyan oil was cut off, the world would not go into shortage.

    Why? Speculation. People were speculating that it would affect the supply and demand (there was no actual proof it did). So my analysis takes that into account, and thus the fall of prices in the short term – no change in the mid term, and fall in the long term. The short term is affected by speculation. In other words, the promise of a more stable supply would send some of the speculators running and drop the price. Once the market stablized, and before the fields came into production (in 3-5 years, not 8), there would be no more supply than before, so prices would not be affected. However, once the fields started coming in, there would be a secure (less affected by despots and tin plated dictator’s whims) supply which would meet demand thus pushing the price down to a point where it was still economically feasible to extract it, and the oil companies to make a profit.

    The 3 cents is simply a PR lie to try to distract people from the reality of opening up more spigots. Those who claim it are also the ones that claim short term prices are being manipulated by speculators. So they are trying to lie with 2 contradictory lies.

  6. Oil price is set on the world market, not by the US. The financial investors in futures and the bonds that fund the wells, ships, storage facilities set the price. US drilling and oil will be sold at world price based on world demand. $.03 sounds like the right ballpark. Also remember that new wells take many years to explore, finance, drill, develop, develop refrinary formulas, transportaion contracts, and all the rest. Might help prices in 2018 not by Labor Day 2011.

  7. History teaches us that a mere change of policy by executive order can cause crude oil and distilled product prices to drop dramatically.

    If Obama rescinded his executive orders limiting or prohibiting domestic oil exploration and reinstated Bush’s EO on that subject, prices for crude oil and petroleum products will substantially decrease almost immediately. But, Obama must also instruct Federal agencies to liberalize their review of leases and drilling permits in favor of dramatically expanding production from all existing and new of domestic oil and natural gas deposits.

    Obama will never do so because he is determined to limit production and use of fossil fuels in favor of renewable sources, a policy that will complete the destruction of our economy.

  8. The goal is not so much to drop the price of oil, but to keep it from going UP in the future as worldwide demand continues to increase and current reserves become depleted. Duh.

  9. The 3 cents is a talking point, nothing more. If you scratch the surface of the talking point, the scab comes off quickly (along with the stability of the talker). A more reasonable estimate – based upon opening up the coast to drilling (the coast, the whole coast, and nothing but the coast) shows a conservative estimate of 60 cents a gallon over the long term (when the fields start to come into production). Initial estimates (i.e. as soon as companies are allowed to drill) show about half of that as speculators would drive down the price in the short term (mid term, no change).

  10. take a look at
    It appears that production costs worldwide average around $35 or so, ranging from around $20 to over $70(deep off-shore). All other costs are ~1-1.5 times that, so the cost of a delivered barrel is in the range of $75-$90 on average. That includes, shipping, profits, administration, marketing, TAXES, etc.

    Don’t look for oil prices to plummet anytime soon or go below $75 for any extended period of time. All the new sources are in the high end of the cost range. But some folks in Texas are set to make a killing. Apparently some of the old fields there have recovered and are delivering oil at rock bottom prices, so the folks who own one can make a very high markup on a modest amount of oil.

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