[E]ven as [the Obama] administration conducted a wholesale review of drilling regulations in the aftermath of the worst offshore oil spill in the nation’s history—the BP Deepwater Horizon oil catastrophe in the Gulf of Mexico—the number of oil rigs operating in the United States has quadrupled. But that massive influx of supply has done nothing to reduce the price we pay to top up our tanks.
More drilling will not lower gas prices. Here’s why:
- It hasn’t worked yet. There are currently more oil rigs operating on U.S. lands and waters than in the rest of the world combined, production is at an eight-year high, and the most recent “Short-Term Energy Outlook” from the Energy Information Administration projects production to continue growing at least through 2013 based on current activity. [...]
- If oil companies wanted to increase production, they could. In March 2011 the Department of the Interior released a report revealing two-thirds of oil-and-gas companies’ offshore leases and more than half of their onshore leases are not being produced.
- Pumping oil takes time. Opening new offshore areas will take seven years to produce any new oil, and the Arctic National Wildlife Refuge will take 10 years to produce a single drop of oil. Even if more production would lower prices, it wouldn’t happen tomorrow. And the Energy Information Administration finds that even if we wave the green flag for our entire exclusive economic zone, it will do nothing more than reduce the cost of gasoline by two cents, and not until 2030.
- You can’t put crude oil in your tank. Ultimately, gasoline supply is constrained not by oil production but by refining capacity. More than half of the nation’s refineries are controlled by five companies, and last spring, as gas prices surged close to $4 per gallon, the Los Angeles Times reported domestic refineries were “operating at about 81 percent of their production capacity,” and that exports of refined products such as gasoline were increasing because foreign buyers were “willing to pay a premium.” Take one look at gas prices in Europe and you’ll understand why.
- Supply is global too. As U.S. production increased, other oil-producing countries actually reduced their output to ensure the price didn’t fluctuate. [...]
Under the Obama administration the United States has put in place new fuel economy standards that will require cars sold in this country to average 55 miles per gallon by 2025. That helps answer the demand side of the equation. The administration is also incentivizing the development of renewable sources of energy that will reduce our dependence on fossil fuels. Diversifying sources of energy will result in greater supply and drive energy prices down. Similarly, we are investing in alternative, domestically produced liquid fuels that may prove capable of supplementing or even replacing traditional gasoline to reduce prices at the pump specifically.