GOP Presidential Hopefuls Mislead On Impact Of Oil Drilling
Last night, potential Republican presidential candidates Mitt Romney and Tim Pawlenty both suggested more domestic oil drilling as a solution to rising gas prices. The fact is, however, that immediate drilling would not lead to significantly lower prices. Studies by the Energy Information Administration, as well as EIA Administrator Richard Newell's own testimony before Congress, demonstrate that more drilling for oil would have little effect on both short-term and long-term pricing. Indeed, the EIA estimates that opening up areas that are currently closed for drilling would only bring down gas prices by about three cents per gallon.
Pawlenty And Romney Say Drilling Is The Solution To Rising Gas Prices
VAN SUSTEREN: Everyone is talking about gasoline. What would you do in the immediate, right now about the gas prices, because they are killing everybody across the country?
PAWLENTY: It is tough to turn around quickly. One thing you can consider is a limited release from the reserve. In the intermediate term we have to get serious about Americanizing our energy sources and developing it aggressively. This president and this administration has been sitting on their hands in that regard. We should be drilling in ANWR and other places around the country. We should have an aggressive posture towards developing American sources. That would help. [Fox News, 4/25/11, via Nexis, emphasis added]
VAN SUSTEREN: Governor, the problem that people are talking about from coast to coast is the price of gasoline. If you were president, what would you do about gasoline, and how soon would you get those prices down?
ROMNEY: Well, you get the prices down by convincing people who are investing in gasoline futures, so to speak, the speculators -- you let them understand that America is going to be producing enough energy for our needs. And that means we're going to start drilling for oil. We're going to use our natural gas resources, which are now extraordinarily plentiful, given new technology. We're going to use our coal resources. Of course, we're going to pursue all the renewables, but you have to have oil and gas to power America's economy. [Fox News, 4/26/11, via Nexis, emphasis added]
More Drilling Would "Not Have A Large Impact On Prices"
Due To "Globally Integrated Nature Of The World Oil Market" Drilling In America Would "Not Have A Large Impact On Prices" Long Term. According to Richard Newell, Administrator of the Energy Information Administration in the U.S. Department of Energy: "Long term, we do not project additional volumes of oil that could flow from greater access to oil resources on Federal lands to have a large impact on prices given the globally integrated nature of the world oil market and the more significant long-term compared to short-term responsiveness of oil demand and supply to price movements. Given the increasing importance of OPEC supply in the global oil supply-demand balance, another key issue is how OPEC production would respond to any increase in non-OPEC supply, potentially offsetting any direct price effect." [EIA.DOE.gov, 3/17/11]
Drilling In ANWR Would See Peak Oil Production Around 2030 But Would Only Lower Prices By "Perhaps About One Percent." According to Richard Newell, Administrator of the Energy Information Administration in the U.S. Department of Energy: "Based on this timetable and the assumption that the largest ANWR fields would be the first to go into production, peak ANWR oil production could occur around 2030 at about 700,000 to 800,000 barrels per day. In this scenario, the greatest impact on crude oil prices could occur 9 around peak ANWR production with oil prices projected to be perhaps about one percent lower as a result." [EIA.DOE.gov, 3/17/11]
A 2009 EIA Study Concludes That "Gas Prices Might Drop A Whopping 3 Cents A Gallon" If Areas Currently Closed To Drilling Were Opened. According to CNN:
According to a 2009 study from the government's Energy Information Administration, opening up waters that are currently closed to drilling off the East Coast, West Coast and the west coast of Florida would yield an extra 500,000 barrels a day by 2030.
The world currently consumes 89 million barrels a day, and by then would likely be using over 100 million barrels.
After OPEC got done adjusting its production to reflect the increased American output, gas prices might drop a whopping 3 cents a gallon, the study said.
Increased Drilling Will Benefit Highest Earners But "Will Have Hardly Any Impact On Gas And Oil Prices." According to CNN:
The problem is this: While increased oil and gas drilling in the United States may create good-paying jobs, reduce reliance on foreign oil and lower the trade deficit, it will have hardly any impact on gas and oil prices.
That's because the amount of extra oil that could be produced from more drilling in this country is tiny compared to what the world consumes.
Plus, any extra oil the country did produce would likely be quickly offset by a cut in OPEC production.
[CNN.com, 4/25/11, internal citations removed]
Even Producing All Of Our Oil In The U.S. Would Not Affect World Prices
At 100 Percent Production, "We Probably Couldn't Produce Enough To Affect The World Price Of Oil." According to Ken Green, resident scholar with the conservative American Enterprise Institute, "producing 100 percent of our oil" in the U.S. still would not significantly affect the price of oil. From the New York Times:
"The world price is the world price," Green said. "Even if we were producing 100 percent of our oil," he said, if prices increase because of a shortage in China or India, "our price would go up to the same thing.
"We probably couldn't produce enough to affect the world price of oil," Green added. "People don't understand that."
- The U.S. "Would Still Feel The Effects Of, Say, A Decision By Hugo Chávez or Vladimir Putin To Stop Selling Any Oil." According to Ben Adler of Newsweek's The Gaggle blog: "In a market economy such as ours, opening an area for drilling does not mean that the U.S. government controls its destination. Shell and Chevron will be perfectly happy to sell their oil to China if Chinese drivers are willing to pay more than Americans. The U.S. could produce exactly as much gasoline as it consumes and it would still feel the effects of, say, a decision by Hugo Chávez or Vladimir Putin to stop selling any oil. If global supply drops precipitously, global prices will rise, and unless we plan on nationalizing the oil industry-a move I doubt either Democrats or Republicans will endorse-the fact that we are drilling for more oil near our shores won't protect us from the price shock." [Newsweek.com, 3/31/11, emphasis added]