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Drilling won’t lower gas prices, but this will

This news story was published on March 26, 2012.
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MCT FORUM, By Dan Becker and James Gerstenzang –

The drill babies are back, touting Exxon-Mobil’s wish list under the guise of cutting the price of gas. But the truth is we’re already on the way to reducing what we spend on it.

In this political season, we’re hearing the broken-record answers to $4 gas: Drill baby, drill; build the Keystone XL pipeline; and raid emergency reserves.

None will solve the price problem today or in years to come. Each feeds the United States’ oil addiction. Each risks damaging the environment or draining strategic supplies. Most important, this noisy debate over supply misses the point: Nothing will cut gas prices right now. But by reducing how much gas we use — by reducing demand — we are already on the road to cutting fuel bills.

With 98 percent of the world’s oil reserves in the hands of other countries, and an international cartel exerting a powerful hand on prices, the United States cannot control what we pay each day at the pump. Under President Obama, drilling is already up 12 percent. Nonetheless, prices have risen. Even new drilling every place that has the oil industry panting will not provide enough to reduce prices significantly.

The U.S. Energy Information Administration estimates that new drilling on the outer continental shelf would not affect prices over the next decade and would cut them by only three cents a gallon in 2030.

As Oppenheimer & Co.’s top oil analyst, Fadel Gheit, told CBS News, “If we drill in the middle of Manhattan and everybody drilled in their backyard we would not have enough oil to move the global market.”

The proposed Keystone XL pipeline is also a dry hole. It would pump heavily polluting low-grade tar sand oil from land-locked Alberta, Canada, to Texas portside refineries. Most of the finished product would be loaded onto tankers — and sent to foreign ports, rather than U.S. gas stations. We’d shoulder the potential environmental pain — pipeline leaks and refinery pollution — for little domestic supply gain.

Tapping the Strategic Petroleum Reserve makes no sense. Iran is threatening to shut the Strait of Hormuz, through which nearly 20 percent of the world’s oil passes each day. Do we want to reduce our emergency reserve just before we might need it? Besides, the modest amount that it would add to supply would have only a small and short-lived impact on prices at the pump. It’s another non-starter.

In short, we’re in a hole. We can’t drill or pump our way out. That is why cutting demand is imperative for a country that gulps 20 percent of the world’s oil production each day.

Taking the biggest single step we can to cut our oil addiction and global warming pollution too, the Obama administration persuaded automakers to double the fuel efficiency of cars and light trucks. Like increased drilling, the administration’s new mileage and emissions standards won’t cut prices today. But unlike drilling, they will help forestall the impact of future price hikes by weaning us off oil.

Cars and light trucks average 29.6 mpg, only about 4 mpg better than 20 years ago. It is obvious the carmakers haven’t been burning rubber to improve fuel efficiency.

But just wait.

The administration’s rules require that new cars and light trucks average 35.5 mpg in 2016. The standards increase to 54.5 mpg in 2025. They will save 12 billion barrels of oil.

To be sure, there are potential speed bumps: The people who make the cars — the auto companies and the United Auto Workers union — support the stronger rules. But the people who sell them, the National Automobile Dealers Association, have tried to block the standards from becoming final this summer.

The dealers are trying to stand between you and saving money at the pump.

More cars that sip gas rather than guzzle it are headed to showrooms. The rules will lead to more hybrids, which will become less expensive when they are produced in greater numbers. That will bring more Americans just one hybrid away from a once-elusive goal: spending less for gas because they need less of it.

We are cutting our oil addiction. This will inoculate us against future price spikes, halve autos’ carbon dioxide pollution, and give us a 50 percent discount at the pump.

That’s like finding a vast new oil supply — under Detroit.

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16 Responses to Drilling won’t lower gas prices, but this will

  1. Bobby G Reply Report comment

    June 2, 2012 at 10:55 pm

    Then why did Obama give Brazil $60 billion dollars for oil exploration. Could that money have not been spent more close to home? Besides I don’t think we have gotten a drop of oil from them yet.

    • Trucker Dave Reply Report comment

      June 3, 2012 at 7:23 am

      Seriously? You don’t know why Obama gave US dollars to Brazil?

      Look up who is the major investor in Brazil’s PetroBras petroleum company.

      Find out why PetroBras was given permits to do deep water drilling, while Obama’s defying “contempt of court” rulings trying to force the administration to allow US companies to return to the gulf.

      The answer = George Soros

  2. Observer Reply Report comment

    March 26, 2012 at 2:33 pm

    4ever49, some very good observations. I will also dispute this article for one very glaring reason. We have a number of refineries who would take advantage of using Alberta oil. The BP refinery in Rosemount, MN is the largest and closest. As well, Whiting, IN and the newly re-opened refinery in Robeson, IL (sp?) are built to use this heavy oil as it is the same as is pumped from S. IL. That same pipeline supplies Sarnia, ON. Keystone would provide added capacity for both.

    And the oil from Alberta is hardly “dirty”, which proves the writer has not done any research, but taken the word (almost in verbatim) of those opposed to the pipeline.

    • Observer Reply Report comment

      March 26, 2012 at 2:36 pm

      Darn my feeble brain! The refinery in Rosemount is Koch Petrol, BP is in Whiting, IN!

      • 4ever49 Reply Report comment

        March 26, 2012 at 3:27 pm

        And your point would be?

      • Observer Reply Report comment

        March 26, 2012 at 7:25 pm

        My point is, Keystone XL would compliment existing pipelines, and this article was completely one-sided.

    • Trucker Dave Reply Report comment

      June 3, 2012 at 7:26 am

      You’re correct – North Dakota and Albert crude are “sweet” crude – very low in sulfur and the heavy oil products like asphalt oil.

      I am aware of this because I haul product out of both the BP refinery in Rosemount and the Marathon refinery in St. Paul Park, MN, and have close connections with the staff there.

  3. Larry Reply Report comment

    March 26, 2012 at 12:43 pm

    And what happens when all of those high priced batteries wear out or burn up. Where are we going to dispose of them. What landfill in what country is going to take them. Talk about poluting the water supply.

    • Zain Reply Report comment

      May 31, 2012 at 10:33 am

      Great show. U.S. uses 20 million balrres/day and produces 7 million balrres/day. Mike did not dispute that fact. Can anyone justify why we should not produce at least as much as we consume, when we can?Here’s another fact. Exxon is the largest company in the world. They will always have record profits in terms of dollars. In fact, their net profit percentage is quite normal, about 10%. Out of the $140+ billion they spend to do business, they net about 10% of it. The numbers are huge because the company is huge. But the percent of net income is quite normal. Soft drink companies run net profits of over 40%. No one is calling them greedy. Health insurance companies net out around 3%. And we all know how filthy rich they are.But Mike is right where green’ energy is concerned. There is a big opportunity for green energy stuff. So go ahead Mike. Tap that resource and all its potential. Make a gazillion dollars at it. As soon as the supply meets the demand, you’ll make George Soros look like a pauper. That is, if you can live to 150. Meanwhile, leave the oil industry to do what the oil industry does. Which is, extract, refine, and distribute fossil fuels.There’s an echo to Mike’s argument about the 10-15 years to get fuel to the pump. I’ve been hearing that for the last 20 years. That’s weird!Besides, the 10-15 year timetable is for outlying areas where there is no infrastructure in place to handle it. In areas where there is, the window is under 5 years. Just because it takes effort, and a huge corporate investment, doesn’t mean it should not be done or that corporations should be prevented from doing their job.

  4. Katie Reply Report comment

    March 26, 2012 at 12:41 pm

    More public transportation is the answer. Quit sending money to countries that hate us and spend those dollars here to improve our transportation infrastructure.

  5. 4ever49 Reply Report comment

    March 26, 2012 at 9:49 am

    1. How is it we only have 2% of the world’s oil reserves? Do these numbers ignore the oil shale reserves in western Colorado and Wyoming and the Bakken formation in North Dakota?
    2. You quoted the U.S. Energy Information Administration saying continental shelf drilling will only reduce prices 3 cents. I’d much rather that we allow drilling – the risk takers who would actually pay for and take the risk are going to a lot more critical about pricing than some agency that is immune from errors in their forecasts.
    3. How is the Keystone pipeline such “dry hole”? Won’t US workers be working at the refineries and maintaining the pipeline? Will not the presence of finished product at the port be a leveling influence on our price of fuel since it can be sold here without incurring tanker shipping costs?
    4. As to the “shouldering of environmental costs”, could you point to major pipeline spills that have resulted in the dire consequences you allude to? Also, since we all live on this earth, would you not want to be able to control emissions locally, or are you good with say, depending on a Chinese refiner to take care of things? Have you seen China’s cities?
    5. I agree we should not tap the strategic reserve. I think someone in the Obama administration brought it up this time. Every administration probably will do the same so as to appear in charge when in fact they are not.
    6. The auto companies and UAW support stronger rules. In the case of GM and Chrysler, are you surprised? I think we all know the recent history on the governments’ role in shafting dealers and bond holders in favor of the UAW.
    7. The rub between government set performance standards and the dealer associations: could it be the dealers are actually the ones at the point where the market is saying no to these expensive vehicles? Are we surprised that a dealer wants products that sell, not Volts that now sit in inventory over 5 months even with a $7,500 subsidy? In the end, the market will trump even government edicts.
    The headline of your article states “Drilling won’t lower gas prices, but this will”. At the least this is sophomoric wishful thinking. While you dream of reducing prices at the pump, any savings will be eaten up in higher relative costs of vehicles.

    • Andjela Reply Report comment

      May 31, 2012 at 6:51 am

      There are laws in place to ensure basic sgfaeuards that businesses of any size must follow, or pay the consequences. Some won’t. Same goes for individuals. Just like some people break in to homes, cars, or a business. The laws are not being enforced or if they are, the penalties are very weak. Look at the coal companies in places like West Virginia.The oil companies do run the energy policy. Where have you been for the last 10 years particulary with Cheney and Bush in charge. If those dittoheads in the oil, coal, gas, and electric companies got out of the way for the last 33 years, the Department of Energy and the USA would gotten alternative energy solutions a long time ago. Instead corporations have prevent people from developing these new energy products because of their huge influence at all level of government. I recall the car industry stating they could not get more mileage out of their car; however, the Japanese prove us wrong, so it is evident that the car makers had no interest even today in increasing our miles per gallon in the last 38 years. They had 38 years to fix the problem and we got no progress out of them, so your free enterprise system is just a myth, don’t you think?The corporations and rich people in this country have a propensity to control everything in this country. During the 1950s, the oil, car, and rubber tire industries got together and use their influence to get rid of the Los Angeles City mass public light rail system and look where Los Angeles is today in terms of car congestion, gridlock, etc. for the last 40 years. Dick Cheney had a secret energy meeting with all those corporations dealing with energy and doesn’t want to reveal what when on. In California, we tried to deregulation with the electric companies; however, those dittoheads at PG&E lost money plus those Texas electric companies manipulate the electric system to create brown outs and squeeze every last cent they could. One of the tapes during those electric companies’ meetings had a CEO stating how he would squeeze every cent out of an old lady. Socialism works very well in Western Europe and in Finland, Sweden, Finland, and Norway and the human spirit is not being suppressed in those countries. You talk about people in Venezuela not being able to afford gasoline, well in America, people can’t afford health care because stagnant wages and outrageous prices charge by the HMOs and the drug companies. There are laws in place to ensure basic sgfaeuards that businesses of any size must follow, or pay the consequences. Some won’t. Same goes for individuals. Just like some people break in to homes, cars, or a business. The laws are not being enforced and even if they are, the fines are weak and CEOs don’t get long prison time. Look at Don Blankenship of the Massey Coal Company. He never had to face hugh fines and/or prison time, because he had the local judges in his back pocket plus the Bush dittoheads in the Bureau of Interior. What I’m seeing from you is a huge resentment of success and pairing that to some sort of unfairness. In America, everyone ‘has a chance’ to be whatever they want to be. No Ross, what you failed to see is corporations and rich people don’t want the rest of us to be successful and destroy any change of being successful in this country. If you recall the movie Tucker, the auto companies gang up on Tucker because they did not want another competitor. If you look at the various contracts in Iraq, Dick Cheney saw to it that his former company got all the contracts and everyone else was denied a fair chance to get them. You are one of these people who still have blinders on of what is happening in this world and will be in a state of denial and always will be until it comes crashing down on your head.

    • kjlseg Reply Report comment

      May 31, 2012 at 4:59 pm

      LV4hgY ejjvyeebzlzz

  6. L.S. Reply Report comment

    March 26, 2012 at 9:09 am

    I agree with reducing our usage of oil products, but at the same time we should increase our supply. That way we have the best of both worlds. By increasing our supply we would immediately reduce speculation which is what is currently driing the gas prices. If we could pass a regulation stating that a given portion of the oil produced here in the U.S. must stay here it would divorce us from depending on the country’s that hate us. This article is nothing but B.S. designed to promote Obama.

  7. TheRealFred Reply Report comment

    March 26, 2012 at 8:18 am

    I thought ethanol was gonna fix everything? What a tax black hole that is.
    Drill baby, drill, we need oil.

  8. confused Reply Report comment

    March 26, 2012 at 7:13 am

    Yeah, lets fill up our tires, purchase cfls, and tune up our cars, that will fix our problem. Oh yeah, lets buy a Prius, too. Even though it takes just as much energy to build one of those as it does a Hummer. Oh, by the way, whats the most polluted place on the planet? Hint; its where the batteries are built for these hybreds.