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Domestic Drilling Doesn't Decrease Gasoline Prices

samzenpus posted more than 2 years ago | from the let-the-flaming-begin dept.

Democrats 736

eldavojohn writes "As the political rhetoric heats up, there's something puzzling about drilling inside the United States. Essentially, it doesn't reduce what we pay at the pump. From the article, 'A statistical analysis of 36 years of monthly, inflation-adjusted gasoline prices and U.S. domestic oil production by The Associated Press shows no statistical correlation between how much oil comes out of U.S. wells and the price at the pump.' If the promises that politicians made when they opened U.S. drilling were true, then we should be paying about $2 a gallon now. Instead it's $4 a gallon. Minnesota Public Radio pulls some choice quotes from both parties and wonders why this decades-old empirical observation goes seemingly completely unnoticed."

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736 comments

Whoops! Solely AP Not MPR (5, Informative)

eldavojohn (898314) | more than 2 years ago | (#39449435)

Minnesota Public Radio pulls some choice quotes ...

Submitter here, my mistake on that above source. When I read this in my news feed yesterday, I didn't see the AP markings all around this story. All of it appears to be completely and solely Associated Press sourced [google.com] . I apologize if that confused anyone.

Noticed that when I was looking to see if anyone had come up with a sufficient rebuttal to this empirical link but aside from a few [kansascity.com] insane pundits [rushlimbaugh.com] , I didn't find much. The remaining arguments for "drill here, drill now" probably rests on "job creation" (waiting on that fact check) and, according to Thomas McClanahan from the Kansas City Star, it "means fewer dollars going to nasty, unstable regimes and more revenue for the Treasury, especially if the drilling is on public lands." He might be right about lowering the trade deficit but I think there are other things we could stop doing to prevent unstable regimes [wikipedia.org] .

Re:Whoops! Solely AP Not MPR (5, Insightful)

fotoguzzi (230256) | more than 2 years ago | (#39449573)

Drilling domestically might not lower the price of gasoline, but perhaps it creates a buffer in case worldwide oil flows are disrupted. That is, if all oil is imported and there is a boycott against the U. S., we are back to 1973, waiting in gas lines. If a local industry had to begin from scratch, prices would presumably be high for quite a while.

Having at least the ability to drill locally should prevent huge price swings every time there is a panic. The price might rise for a while, but presumably the large oil producing companies would return to the market with slightly lower prices.

A Few Notes on Your Suggestion (4, Insightful)

eldavojohn (898314) | more than 2 years ago | (#39449683)

Drilling domestically might not lower the price of gasoline, but perhaps it creates a buffer in case worldwide oil flows are disrupted. That is, if all oil is imported and there is a boycott against the U. S., we are back to 1973, waiting in gas lines. If a local industry had to begin from scratch, prices would presumably be high for quite a while.

You're right but I would like to point out two things. One is that you seemingly forgot to mention the Strategic Petroleum Reserves [wikipedia.org] that were created after that boycott. Despite what pure capitalists say about its influence on the market, this reserve still exists and has come in handy for taking "loans" out of during catastrophes. This would help us transition from foreign dependence to massive drilling at home.

The other thing is that we actually do a lot of our own oil refining (especially in Texas) [wikipedia.org] . So, it's not like we're missing that huge part of the infrastructure, we import the crude and refine it on our soil. So really what we're missing is just the crude pipeline. The "local industry" you speak of is actually mostly already here to support us, all that's missing is the source and transportation of the crude (since it would probably flip from cargo ships to trucks initially?). What it comes down to is how long would it take a company to drill and lay pipeline? Probably not very long ... they have crazy revenues.

Re:A Few Notes on Your Suggestion (5, Informative)

landofcleve (1959610) | more than 2 years ago | (#39449791)

There's a third thing to consider, that being that last year the U.S.'s largest export was....gasoline! [yahoo.com] It comes down to the fact that the U.S. is using less gas, and instead of lowering prices to encourage more consumption to increase profit margins, the gas companies sell it off outside the U.S., largely to South America, keeping prices high.

Re:A Few Notes on Your Suggestion (5, Insightful)

Archimagus (978734) | more than 2 years ago | (#39449803)

I think the big thing we need to do is figure out WHY the prices don't come down from domestic drilling. I would bet it doesn't have nearly as much to do with the cost of drilling, and way more to do with the fact that people on Wall Street decide what a barrel of oil is worth, it doesn't matter where it comes from.

Re:Whoops! Solely AP Not MPR (-1)

Anonymous Coward | more than 2 years ago | (#39449759)

niggers

Re:Whoops! Solely AP Not MPR (5, Insightful)

AlecC (512609) | more than 2 years ago | (#39449763)

Not really, as long as oil is freely traded. If oil spikes from, say, $120 a barrel to $150 a barrel, do you seriously expect US-based producers to turn their back on $30 a barrel extra profit in order to please domestic consumers? They will either export their production or (more likely) expect domestic consumers to pay the market price. It is called the Free Market and the US is supposed to be keen on it. Oil is one of the most transportable, commoditized things around, and the market is world wide.

Re:Whoops! Solely AP Not MPR (4, Insightful)

arth1 (260657) | more than 2 years ago | (#39449623)

I think you're missing the point, which isn't to drive down oil prices, but to make the country less reliant on foreign oil imports and to improve trade deficits.
That's a laudable goal, but unfortunately it doesn't help the consumer, it just helps the Rockefellers and Gettys.
Why? Because it's a piss in the ocean. If you have a street full of limonade sellers who sell it at 99 cents per cup, and you have a limited amount that you can sell at 50 cents, you won't do so. There's not enough of your product to have an effect on the market price. So your price will converge towards the common price.

How to make it benefit the public, then, in the short term? Regulation and taxation. The oil industries are given special privileges that they don't need. The US of A is no longer in a boom period where incentives were given to sustain the overall high growth. Start taxing them at a reasonable level for using up non-renewable resources that belongs to the country.

Re:Whoops! Solely AP Not MPR (0)

Anonymous Coward | more than 2 years ago | (#39449659)

I think you're missing the point, which isn't to drive down oil prices, but to make the country less reliant on foreign oil imports and to improve trade deficits.

Wouldn't having an oil reserve make us less vulnerable to disruption of foreign oil supplies? Keep our oil, buy theirs while moving to an economy not dependent upon oil at all. Whether we succeed in the latter goal or not, the oil reserve is the conservative hedge and down the road oil is simply going to become more and more scarce and thus more valuable.

Re:Whoops! Solely AP Not MPR (-1, Flamebait)

GmExtremacy (2579091) | more than 2 years ago | (#39449721)

There are no taxes. If you dance with your bootyass as you please like corn on peas, you'd know that.

Re:Whoops! Solely AP Not MPR (2, Funny)

Anonymous Coward | more than 2 years ago | (#39449653)

my mistake

Hey, hey, stop that! We don't do that sort of thing around here.

One word (4, Interesting)

TraumaFox (1667643) | more than 2 years ago | (#39449457)

Speculation. That's what it boils down to, folks. If you really want to see $2.00 gas prices again, outlaw speculation and it will happen overnight. It is absolutely mind-boggling that this practice is allowed with no checks or balances to keep it from driving our gas prices sky high. People will bring up anything else, like gas taxes or domestic drilling, just to draw attention from the real problem. It's almost like no one on either side wants to have that conversation, though.

Re:One word (3, Insightful)

repapetilto (1219852) | more than 2 years ago | (#39449477)

Outlaw speculation... how will the price be determined?

Re:One word (0, Troll)

msauve (701917) | more than 2 years ago | (#39449519)

"how will the price be determined?"

From each according to his ability, to each according to his need.

Re:One word (1)

repapetilto (1219852) | more than 2 years ago | (#39449611)

Aren't there practical issues with that? I mean doesn't it require a central power being able to assess "need" thus leading to corruption and inefficiency?

Re:One word (1)

gtvr (1702650) | more than 2 years ago | (#39449661)

That's his point. Are you familiar with the context that phrase is usually used in?

Re:One word (5, Insightful)

SomeKDEUser (1243392) | more than 2 years ago | (#39449735)

That was the motto of the communist system. Just in case you weren't making your comment tongue-in-cheek.

But there is an important point hidden there. In politics, you will hear "free markets are GOOD", "central planning is BAD". Or sometimes the reverse (in Europe). People forget that the point is to maximise the goods and services produced, as well as their access from everyone.

If you have no idea what to produce, a market is a good idea. If you know exactly what to produce, a market is an idiotic idea: central planning is the way to go. If you know that this good or service will produce a natural monopoly, you should go for either a tightly regulated market (but due to regulatory capture, this is dangerous) or central planning.

In real life, there are also externalities. Tax accordingly so that your market works better. Yes, taxes are a vital component of making markets work: you want the real price to be reflected, e.g. pollution must be paid for by the polluter.

TL;DR : regulation and taxes on externalities are important. Monopolies should be public. Leave the rest to the market if you don't know what is optimal. If you do, get rid of the market. In the future, robotic overlords will and should plan the economy for us.

Re:One word (3, Insightful)

TraumaFox (1667643) | more than 2 years ago | (#39449589)

Hopefully by actual supply and demand, rather than what speculators predict future supply and demand will be.

Re:One word (3, Informative)

repapetilto (1219852) | more than 2 years ago | (#39449761)

So, under your system, if I need to buy oil for some purpose, am I allowed to predict that it will be cheaper in a month and wait until then? This really makes no sense to me so I must be misunderstanding.

Re:One word (3, Insightful)

jythie (914043) | more than 2 years ago | (#39449607)

Via the market? Companies selling their product to other companies that use it, rather then speculators inserting themselves between buyer and seller.

Speculation pulls money out of a market and raises prices without adding value simply because people with enough resources are able to force getting their 'share' of whatever is going on. Markets do just fine without speculation, in fact they generally do better with lower prices and greater stability... but fewer useless people getting very wealthy for no other reason then already being wealthy.

Re:One word (1)

repapetilto (1219852) | more than 2 years ago | (#39449667)

Say I am an oil refiner. I think the price is inflated right now due to the trouble with Iran. Should I buy oil at the current price, wait until the price drops, offer a contract to buy at a lower price in the future, etc? Is this not speculation?

Also what markets exist without speculation that show lower prices and greater stability? This seems very unlikely to me, but you may be right.

Re:One word (5, Informative)

LF11 (18760) | more than 2 years ago | (#39449619)

I congratulate you and wish you well in your asbestos underwear!

Speculation is not the problem. The safety net provided by government bailing out the biggest speculators (the big banks) is the problem. Let those folks go out of business like they ought to, and we wouldn't have a speculation problem.

cej102937

Re:One word (1)

gtvr (1702650) | more than 2 years ago | (#39449669)

I think your point is generally correct, but are the banks big speculators in oil & gas?

Re:One word (1)

cfulmer (3166) | more than 2 years ago | (#39449697)

In general, no. Those aren't assets that banks are allowed to count as "capital" on their books. They may make loans to people for oil and gas wells, but they do not invest in futures contracts on commodities.

"Hedge funds", not banks (4, Interesting)

Kupfernigk (1190345) | more than 2 years ago | (#39449789)

I don't have the exact figures, but at one time most oil futures were all about the actual users of the oil - refineries and so on - and were perfectly legitimate. Futures are what is needed to get farmers to raise hogs and grow corn, after all. Things went wrong when the futures were taken out by people who were not in the supply chain at all. This could be made illegal, but hedge funds have enormous political power.

Speculation of this kind has a long history. G K Chesterton, nearly a hundred years ago, referring in passing to the scandal of the time, wheat futures buyers who were not millers or grocers trying to buy up the entire wheat crop in order to raise prices to whatever they thought would not actually collapse civilisation while making them rich. Currently, I believe, over 70% of oil production is accounted for by hedge fund futures. It is a classical cornering of the market - but it could only be addressed by sending gunboats to banana republics like the Bahamas, the Channel Islands, the State of Delaware and the City of London.

Re:One word (4, Insightful)

TheRaven64 (641858) | more than 2 years ago | (#39449655)

The same way it was before the USA deregulated commodities speculation about 15 years ago. A limited number of speculators were allowed, but mostly the price was determined by supply and demand, i.e. most of the people buying commodities were people who actually needed them, not people who were hoping that they could sell them for a higher price.

Re:One word (0)

Anonymous Coward | more than 2 years ago | (#39449671)

The price of oil can fluctuate freely because crude is a fungible commodity. If you increase transaction cost on it enough, say by stating that any party that purchases an oil contract on CBOE / CME / etc must take delivery, the price would plummet.

There's a counter argument to this that goes: The price would rise, as oil producers would bear more risk, and would price that risk into the oil they sell... but it's a pretty dumb argument. The whole "Ma & Pa sell a contract to lock in a price for their crop-in-the-field" argument is obviously out of touch with reality at this point.

The problem is that if you tried these kind of market controls, the market would just leave your country in favor of another with looser restrictions.

Re:One word (1)

ed1park (100777) | more than 2 years ago | (#39449731)

Easy, by a market with a long term interest in stable prices. How? Also easy.

1. 100% capital gains tax for short term investments of 1 year. (helpful if applied to everyone, but at least require it for all hedge fund and wall street investors/traders.)
2. Require the parties to take delivery on the commodities they are buying options for. (less practical)

Instead of hedge funds and other speculators manipulating futures trading with commodities such as oil, we would have only relevant parties that use the product itself such as gas stations, utilities companies, airlines, etc.

Re:One word (2, Insightful)

Anonymous Coward | more than 2 years ago | (#39449481)

Good luck legally defining what constitutes "speculation".

Re:One word (5, Funny)

TraumaFox (1667643) | more than 2 years ago | (#39449505)

We can only speculate

Re:One word (1, Insightful)

Anonymous Coward | more than 2 years ago | (#39449549)

Simple, require any bulk purchases of oil to be earmarked with purposing (Storing for refining x months in the future, filling demand when supply drops below x barrels, fleet use for large companies, etc). Additionally set minimum quotas for large corporations based on projected fuel demands. While this all sounds overly meddlesome, they keep talking about raising the taxes on gas due to soaring profits, so why not just put some checks into place to ensure pricing can not be artificially inflated?

Problem, besides factcheck speculation here (3, Insightful)

OeLeWaPpErKe (412765) | more than 2 years ago | (#39449673)

Ok, now implement this in China. If you do it in the US alone it will have exactly zero effect.

Frankly, the link between oil prices and speculation is another thing that should be fact checked. Unless I'm missing something the only thing that adds significantly to the price of oil (aside from US sales and oil taxes, things that matter more than a few cents, however rich you think ExxonMobil is, their cut out of your $4 is 2-3 cents) is the money taxed out of it by the insanity that is the saudi government. And even that amount is dropping rapidly according to theoildrum.com.

So pretty much the only action that would have any chance of dropping oil prices more than $0.10 or so would be to invade a few countries in the middle east. And China wouldn't let the US do that. Do you really think that the massive inefficienciency that these regulations would impose would be less than the 2-3% that speculation + refining + transport + ... is today ?

Do not take this that I support speculation as an activity in itself. It's morally reprehensible when you think about the fact that a lot people need oil to avoid freezing to death. Then again, given that, speculation is not nearly as reprehensible as driving a Ferrari, or driving where you could walk or bike.

Re:One word (4, Interesting)

rednip (186217) | more than 2 years ago | (#39449603)

There are proven ways to reduce the effects of speculation. I know for a fact that increasing margin requirements (the amount of cash you need to put down to hold a contract) is one of them. The trick is getting such tactics passed by a GOP filibuster or (a partially Democratic one when the GOP can't quite hold the line, as Wall Street money is just that good).

Re:One word (1)

magamiako1 (1026318) | more than 2 years ago | (#39449571)

I feel like "checks and balances" is an overly used term by people who don't understand what the original intent and meaning was. Amusingly, the phrase is not used in the Constitution anywhere.

Re:One word (1)

magamiako1 (1026318) | more than 2 years ago | (#39449599)

What you're meaning to say is "There's no regulation" in the market. Regulation by a regulatory body voted in by the public for the public interest *IS* your "checks and balances", at least it's supposed to be. Getting rid of said regulation is not the answer, however.

The reality is the investors and speculators know we NEED the gasoline, and as long as it doesn't tank the economy, they'll make us pay whatever they want.

Re:One word (1)

foniksonik (573572) | more than 2 years ago | (#39449717)

And? Speculation without depositing funds against it (making those funds unavailable for other things) is a perfect example of a lack of checks and balances. Quite literally the speculators are allowed to write a check but are not required to hold the balance to cover that check. They "float" it and rely on inertia to keep their investment of imaginary funds from being called on, eg they sell the investment and get the profit before having to pony up the cash.

Re:One word (5, Informative)

cfulmer (3166) | more than 2 years ago | (#39449583)

Please spell it out: what are the mechanics of speculation driving up gas prices?

Speculators buy and sell futures contracts. Every time they buy a contract, they are betting that the price of oil will go up. But, whenever they buy, somebody else is selling, betting exactly the opposite - that prices will go down. And, recall that speculators eventually have to sell those future contracts (or have 100 tanker trucks pull up to their homes.) When they do, the price will be determined by the actual facts on the group -- how much demand is there, and how much oil is being produced at the time.

Re:One word (1)

Hognoxious (631665) | more than 2 years ago | (#39449679)

At least he didn't claim it's a Ponzi scheme (the usual code round here for "I don't understand this at all so it must be a scam")

Re:One word (5, Informative)

TraumaFox (1667643) | more than 2 years ago | (#39449757)

Speculation and futures bend the rules of supply and demand. Gas prices are not determined by actual supply and demand, they are determined by speculators hedging on low supply in the future. Would you care to explain why despite supply being at an all time high just a few years ago, prices never came down to match? You can't say that it has anything to do with our oil coming from unstable nations; it's been that way for a long time, decades before we ever saw gas prices climb above the $2 mark.

I take it what you're asking is how futures contracts actually impact the market price of anything since they are essentially an artificial market not bound by the laws of supply and demand. When speculators buy enough contracts at above the current market price, oil producers see this and start artificially limiting their supply in hopes that they'll be able to sell it all down the road at that higher price, and that causes the price of oil to go up now. We had an agency called the CFTC put in place specifically to prevent this sort of thing from happening, but what happened? Enron happened.

You remember Enron, don't you? They were instrumental in exploiting a loophole in the CFTC's regulatory powers to allow oil speculators to trade outside of those regulations. As the CFTC lost power, the futures market exploded, and as it has continued to increase dramatically over the past decade, so too have oil prices. You have to be out of your mind to argue that oil prices coincidentallyskyrocketed with the futures market.

Re:One word (3, Insightful)

XxtraLarGe (551297) | more than 2 years ago | (#39449701)

Speculation. That's what it boils down to, folks.

No. Speculators play a valuable role in the market, by taking on risk. They don't control the price of any commodity any more than than consumers do.

Gas prices are going to stay at $4 a gallon as long as people are willing to pay it. It's supply and demand. If demand dropped by half overnight, you'd see a precipitous drop in prices as well.

Another word (2, Insightful)

Goonie (8651) | more than 2 years ago | (#39449713)

Rubbish.

Storing large quantities of oil is very expensive, unlike, say, gold or diamonds. You can't hoard the stuff. Ultimately, the stuff has to be sold to consumers, and if high prices drive demand down (and demand for fuel is elastic, despite a lot of nonsense to the contrary) speculators will lose their shirt.

The reason why oil are prices are at historicallly high levels, and have been for the past few years, is that global demand has not kept up with global supply, mostly because China and to a lesser extent other parts of the developing world is buying more of it. Incidentally, this is exactly the same reason why a bunch of other commodities, including other fossil fuels, metals, and agricultural products, have gone up in price.

Re:One word (0, Flamebait)

Charcharodon (611187) | more than 2 years ago | (#39449823)

So in otherwords you want to be assigned when and how much you can buy gas for? Commrad Lenon would be so proud of you!

Here is an example for you.

You think the price of gas is going up before a holiday so you rush over to the gas station a few days in advance and fill up your car and an extra gas can to avoid the higher price. You are actually speculating.

So that should be illegal right? Oh wait you mean when the "other guy" does it because he is just being evil and trying make money off of it and only when he buys a whole bunch of gas! Like say a farmer or a businessman or an airline......

Oh wait you mean those really bad "other guys" buying and selling futures in the stock market. Those evil jerks drive up the prices right? So now the regional distributor has no fuel to carry your city through said holiday because he can only buy fuel when it's his turn at the set low price and when you go to fill up your car at the gas station they have no gas................Starting to get the idea yet?

The President or Congress or some beurocrat in Washing would get to pick when you get fuel for your city based on it's need, and since you and your city didn't vote for them in the last election (or pay bribes) they choose to put you very low on the waiting list for that wonderful cheap fuel. See isn't central planning fun!!

You need to go take a couple a couple of economics classes and I don't know maybe read a little history from the WW1 & WW2 and about the fuel shortages during the 70's to find out that price fixing and rationing does not work......ever

Come back when you head has a little more content in it and maybe then you can have a valid opinion.

Wait... (0)

Anonymous Coward | more than 2 years ago | (#39449463)

This is campaign season, thus why should politicians let facts get in the way of a winning argument?

False Premise (2)

EmagGeek (574360) | more than 2 years ago | (#39449475)

Oil prices do not depend solely on the amount of production in the United States. Oil prices, which drive gasoline prices, depend on many factors in addition to domestic production, such as world wide production, and political tension in producing areas.

Re:False Premise (2)

repapetilto (1219852) | more than 2 years ago | (#39449529)

The thing is that everyone knows we will run out of the stuff eventually and in the meantime it is getting harder and harder to find and extract. There is no reason to think the long term trend is going to be anything but higher and higher. This leads leads to a positive feedback loop amongst the speculators, but actually this is a good thing.

If the government just set the price of oil we would literally just keep using it up until the point there is none left, it will never be in a politicians best interest to have higher oil prices. Allowing the market (not free) to have an effect on the price will at least put the brakes on (higher and higher prices) before we really run out.

Re:False Premise (2)

OeLeWaPpErKe (412765) | more than 2 years ago | (#39449727)

How much oil is left is a function of a number of things, like the price. If the government were to mandate $2 prices, we're out of oil. At $4 we've pretty much got the oil we want, but as you say it's getting harder to find every day. Sadly, the prices rise by a factor as time goes on, so the oil price will increase exponentially, not linearly (although $4 may be the result of price perturbations like political tensions, so it's probably not quite at $4 yet ...)

Eventually we'll hit the 1:1 on EROI (energy return on investment) and we'll really be out of oil, despite the fact that there's still more in the ground than the cumulative total ever extracted at that point. But pumping up oil wouldn't gain you energy anymore. Then oil will really be finished. Right now we're at 1:12 according to theoildrum, which sounds good until you realize we come from 1:200. This also means that just a little bit shy of 10% of oil production is today being used just to pump up oil, another one of those numbers that rises exponentially.

Oil will increase in price for a few years yet and remain available, but long before the wells are dry it will become useless. This will happen quite suddenly, in a few years.

Re:False Premise (4, Insightful)

bunratty (545641) | more than 2 years ago | (#39449561)

That wasn't hypothesis, according to TFS. The hypothesis was that drilling more oil in the U.S. would cause gas prices to decrease. In other words, the amount of drilling in the U.S. would be one factor of many, not the sole factor, for determining gas prices. The analysis showed no correlation between drilling in the U.S. and gas prices, so the researchers were not able to find evidence to support the hypothesis.

I see a similar mistake when people try to "disprove" global warming by showing that climate changes naturally. Just because climate changes naturally does not mean that increasing the amount of carbon dioxide in the atmosphere artificially cannot also change climate. Natural factors (such as solar output or the orbit of the Earth) are some factors, and human-casued factors (such as more aerosols or carbon dioxide in the atmopshere) are others. Of course, there is no one factor that determines gas prices or climate.

Re:False Premise (0)

Anonymous Coward | more than 2 years ago | (#39449809)

Extra drilling did cause gas prices to bottom out. Natural gas, not gasoline. It's in the $2 range [cmegroup.com] and has been as high as $10. We need to use more natural gas, but CNG fueling stations are hard to find.

Re:False Premise (1)

jythie (914043) | more than 2 years ago | (#39449639)

Strawman..... of course prices do not depend 'solely' on speculation, but that part of the market does have a significant, potentially even dominant, effect.

Refining capacity (1)

gtvr (1702650) | more than 2 years ago | (#39449699)

You can have 10 trillion barrels of oil, but if you can only turn 1M / day into gas, that is your limiting factor. (I'm using made up numbers to illustrate a point). I think that has always been more of an issue. Anyways, don't liberals want higher gas prices, to discourage consumption?

It's because it's a WORLD market (0)

Anonymous Coward | more than 2 years ago | (#39449483)

Oil is a commodity. If I can get $100 selling my barrel of American-drilled oil in Europe, but only $50 in the USA, guess what? I'm selling to Europa. And then because of supply and demand market pressures... the price goes up in the USA.

Re:It's because it's a WORLD market (2)

mrbester (200927) | more than 2 years ago | (#39449537)

I'd bet you'd get a lot more than $100 a barrel if you sold it to a Jovian moon as the transportation costs are literally astronomical.

Re:It's because it's a WORLD market (1)

windcask (1795642) | more than 2 years ago | (#39449541)

I'm selling to Europa.

Io, Ganymede and Callisto will be most displeased.

Re:It's because it's a WORLD market (1)

wisnoskij (1206448) | more than 2 years ago | (#39449559)

You do realise that gas prices fluctuate greatly in different locations, I think there are places where you pay over double what the US pays for gas.

Re:It's because it's a WORLD market (1)

cfulmer (3166) | more than 2 years ago | (#39449615)

Yup. A lot of that is determined by government taxes on gasoline -- US taxes, by world standards, are quite low. Local factors certainly affect gas prices.

Re:It's because it's a WORLD market (1)

O('_')O_Bush (1162487) | more than 2 years ago | (#39449689)

It has more to do with who is producing the oil. In places where oil production is nationalized (like Saudi Arabia), one can find >100 octane petrol for ~0.25$/gallon.

Gee, what a coincidence (-1)

Anonymous Coward | more than 2 years ago | (#39449509)

Gee, who could've thought that after our boy-wonder President has taken a beating in the public for blocking the construction of the Keystone pipeline, you now have glowing articles in the state-controlled Associated Press shilling for the administration, and now claiming that it's no big deal, and that domestic oil production would have no effect on market prices anyway?

Of course, only four short years ago it was entirely Bush's fault that the oil prices were rising. The same AP was telling us then all about how Bush and Cheney were conspiring to keep the gas prices high, because that's how they make their money, from their oil investments. And campaign contributions from oil companies. And payoffs from Shell. Mobil. And all other oil companies who are making obscene profits from high gas prices.

But, heavens-to-betsy, it now turns out that the president has absolutely no control, and has nothing to do with the gas prices shooting through the ceiling! Who woulda thunk it?

Re:Gee, what a coincidence (1)

mozumder (178398) | more than 2 years ago | (#39449567)

I also hate science.

If only everyone just used faith, instead of reason. Faith is so much better!

*I* am better!

Yeah, the AP Is Really Shilling for Obama, HA! (4, Informative)

eldavojohn (898314) | more than 2 years ago | (#39449601)

you now have glowing articles in the state-controlled Associated Press shilling for the administration

Really? Did you catch this part of the article:

Politicians - especially those in the party that's not occupying the White House - have long harped on high gas prices when expedient. Then-Sen. Barack Obama said in 2008, when he was running for president, that "here in Ohio, you're paying nearly $3.70 a gallon for gas, 2-1/2 times what it cost when George Bush took office."

But Obama, who has seen gas prices go up 73 percent since he took office, was singing a different tune last week in his weekly radio address: "The truth is: The price of gas depends on a lot of factors that are often beyond our control. Unrest in the Middle East can tighten global oil supply. Growing nations like China or India adding cars to the road increases demand. But one thing we should control is fraud and manipulation that can cause prices to spike even further."

Sort of makes him sound like a two-faced idiot to me. On the campaign trail he promised to fix all this and now he's in the same spot as Bush with the same damned effect on gas prices!

And the idiocy of calling the AP "state owned" is really funny considering you just said they ripped on Bush and Cheney about a conspiracy. Hello! For 8 years, Bush and Cheney were president and vice president. If the AP was state owned and if they ruled for 8 years, why didn't they just dissolve it after publishing all those "conspiracy theories" you stated? The AP is a Not-for-profit cooperative that has been around since May of 1846 -- 15 years before the start of the American Civil War!

Re:Yeah, the AP Is Really Shilling for Obama, HA! (0)

Anonymous Coward | more than 2 years ago | (#39449647)

Well, he is a two-faced idiot so I don't see any other way he can sound when you look at the facts.

Re:Gee, what a coincidence (1)

jythie (914043) | more than 2 years ago | (#39449665)

Since when is AP 'state controlled'? They are one of the oldest, most respected, and impartial news sources around.

Speculators at fault... (0)

Anonymous Coward | more than 2 years ago | (#39449517)

By allowing them never to take delivery of the oil on the contracts they buy by letting them repurchase the contracts right before they come due, they will continue to screw with the prices.

Also, link oil prices from OPEC to the cost of food and other goods they import. Let's see how they like corn at $120+ a bushel.

Obvious (3, Insightful)

tbannist (230135) | more than 2 years ago | (#39449521)

Personally, I would have thought this was obvious. Any additional oil generated by the U.S. is pretty much a rounding error compared to the major producers, with international markets, American oil well are going to want to earn just as much as international sellers, if they had to choose between selling for less domestically or getting more on the international market they're going to go for more. They're essentially required to do so by their shareholders. In the absence of an amazing discovery of vast reserves of cheap, easy to extract, untapped oil reserves, the only way to actually get lower prices would require price controls and subsidies to force the price of gas lower and, frankly, I think that would be much worse than high gas prices.

Re:Obvious (1)

WillAdams (45638) | more than 2 years ago | (#39449605)

posting to undo accidental ``Offtopic'' moderation which should have been ``Interesting''.

World price, FOB some port or other (1)

davecb (6526) | more than 2 years ago | (#39449633)

Indeed: The only time you get less-than-world-prices is when you can't ship your oil to a port, and have to sell it somewhere near you produce it. That's exactly what's happening with the Alberta oil/tar sands: It sells for a moderate price in Alberta and more when refined, but will sell for much more unrefined if it can be shipped to the Gulf coast or a port in British Columbia.

The Canadian and Alberta governments seem quite happy to not refine it, but sell it to, in the current proposal, China. This is short-term-smart, long-term dumb (;-))

--dave

Absurd... (5, Insightful)

cfulmer (3166) | more than 2 years ago | (#39449525)

This is the problem when journalists with political agendas pretend to be statisticians. Oil is sold on a global market and goes to many different uses. You cannot look at one part of the supply and say "well, increasing this particular part of the supply didn't affect prices in this other particular market." There are too many other factors to consider: How much oil did other countries use? How much oil was diverted to purposes other than producing gasoline, such as plastics or heating oil? What happened to production in other areas? NONE of this is accounted for in this silly "analysis." Most telling? The analysis excluded the oil shocks of the early 1970's. Why? That was the clearest time that domestic gas prices (and supply) are driven largely by the global oil market. Yet, this analysis is being put into papers all across the US. For what purpose? Could it be to deflect criticism from the Presidents' drilling policies? When an analysis concludes "therefore, the basic laws of economics don't apply," then just like one that says "therefore, the law of gravity doesn't apply," our first instinct should be to question the analysis, not the basic laws.

Re:Absurd... (2)

joelwhitehouse (2571813) | more than 2 years ago | (#39449593)

When an analysis concludes "therefore, the basic laws of economics don't apply," then just like one that says "therefore, the law of gravity doesn't apply," our first instinct should be to question the analysis, not the basic laws.

Exactly. Supply and demand is still in effect here. A sufficient increase in supply of crude oil will lower the price of refined petroleum products.

Re:Absurd... (0)

magamiako1 (1026318) | more than 2 years ago | (#39449609)

The "market" controls nothing. The price is entirely by speculators and investors. Get rid of the buying oil futures or severely limit their overall price and you'll see changes quickly.

Re:Absurd... (3, Insightful)

cfulmer (3166) | more than 2 years ago | (#39449637)

As I posted elsewhere, please spell this out, because it just doesn't make sense. How do speculators increase the price of oil? What are the mechanics involved? Recall that every time a speculator bets that the price will rise by buying a futures contract, somebody else is betting that the price will fall, by selling a futures contract.

Re:Absurd... (1)

repapetilto (1219852) | more than 2 years ago | (#39449723)

I agree, this anti-speculation concept is strange.

Re:Absurd... (0)

Anonymous Coward | more than 2 years ago | (#39449737)

This is the problem when journalists with political agendas pretend to be statisticians. Oil is sold on a global market and goes to many different uses. You cannot look at one part of the supply and say "well, increasing this particular part of the supply didn't affect prices in this other particular market."

Actually, yes you can, especially in response to claims by many prominent people in the press and in political office (or running for it) that you can manipulate that specific price in that specific market by changing policies about that one tiny part of the supply.You can absolutely look at the correlation or lack thereof between this policy and gas prices as a predictor of whether or not their hypothesis holds up. There is no statistical, scientific support for the claims that increasing domestic oil production will lower US gas prices, and that is is contradictory to most popular opinion. This needs to be remedied with education and responsible reporting.

Re:Absurd... (2)

cfulmer (3166) | more than 2 years ago | (#39449801)

This is not responsible reporting. Anything that increases global supply will cause prices to fall, if you hold everything else constant (i.e. compared to where they would have been if you had not increased global supply). Domestic drilling is intended to increase global supply. The problems with the article were (1) it didn't look at global supply -- only domestic production, and (2) it didn't hold everything else constant.

You Obviously Didn't Read the Report (1)

eldavojohn (898314) | more than 2 years ago | (#39449765)

This is the problem when journalists with political agendas pretend to be statisticians.

From the report:

This chart, produced by John Grego of the University of South Carolina, shows no apparent correlation between changes in gasoline production and changes in gas price at the pump.

This analysis, performed by economist Phil Hanser at the energy consulting firm The Brattle Group, confirmed the AP's findings -- that production does not correlate with the adjusted price of unleaded gasoline.

Political agenda or not, they got a third party confirmation. Of course this doesn't account for "production in other areas" because you can't control production in other areas! This report is to examine if, historically, domestic drilling has lowered domestic prices on the assumption that domestic drilling is the only thing we control.

Well DuH! (0)

Anonymous Coward | more than 2 years ago | (#39449527)

This is how low prices initially brought about by competition, reaches their natural high because owners need a new beach house or chalet in the Rockys. And those high prices will be here to stay!

Government control? (1)

wisnoskij (1206448) | more than 2 years ago | (#39449531)

Could it not be just that the US government has agreed to keep prices low-ish. I believe that gas is far cheaper in the US then in most of the rest of the world, and the price might not fluctuate with the US production, but that does not mean that US production is not needed for the government to offer as big savings as they do.

Re:Government control? (1)

will_die (586523) | more than 2 years ago | (#39449783)

The reason for big price differences is taxes.
There was an article a few years ago and floats around here that removed the taxes from fuel and IIRC the U.K had the cheapest gas when comparing the countries of Europe, USA and Canada.

Why is this surprising? (0)

Anonymous Coward | more than 2 years ago | (#39449565)

American production is tiny relative to our consumption, price is determined by the marginal barrel of oil refined (i.e the highest cost/quality), and for decades that barrel has come from overseas where American production plays virtually no role in determining the price. The correlation is strong between gas prices and the overseas benchmark, except for certain states and then only since 2009 when the WTI benchmark began diverging from the world benchmark - and that only affected some midwestern states.

Every single energy-related website I've read has decried the bullshit that politicians have spouted regarding either plans to bring down gasoline prices or their record on energy. Republican plans to bring down gas prices won't work unless they engineer a huge demand decrease (which means a recession), interdict shipments to India/China/Brazil and redirect them to the US, begin Soviet-style rationing, or something similarly ridiculous.

Obama's record on oil production is due to loosened regulation from the Bush era that allowed extra production to come online during his term, and his administration's power over the gasoline price is limited to the few cents per gallon we have as a federal gas tax - which, by the way, it's a bad idea to ditch, because those pay for most Federal road and highway maintenance. It's not like Obama can influence the real big producers with spare capacity (i.e. OPEC, since Russia, Mexico, Brazil, Canada are all producing flat out) nor can he cut developing country demand. Since production has been stagnant since 2005, some of the increase in the oil price has been due to monetary expansion, but not only would stopping that in the US kill our recovery (and destroy the independence of the Fed), but it wouldn't matter anywya because every central bank in the world except the Swiss is flooding the world with low-interest rate cash. Perhaps the only thing I could see him doing to influence the oil price plausibly is to stop Iran from saber rattling, except that any action on that front is likely to make things worse.

This correlation is utterly predictable.

Surprised? (1)

Anonymous Coward | more than 2 years ago | (#39449569)

When did politicians ever speak anything resembling the truth? Here in Norway we have a lot of oil production and we pay closer to $9 per gallon at the pumps. Most of it is tax. Why? Because we'd rather export the oil than burn it. It's ALL about jobs and foreign trade balance.

That's because domestic oil gets shipped overseas (1)

LF11 (18760) | more than 2 years ago | (#39449575)

Just like the Appalachian coal that gets shipped to China. To me, that is almost the most despicable part of the whole mess. If we produce cheap oil or cheap coal, it gets shipped out of the country.

Not all of it, of course, but enough to ensure that domestic oil drilling effectively only reduces the international price of oil, where it is comparatively far less effective.

The Appalachian coal really gets my goat. I regularly see the trains heading to the nearby port, loaded over with coal getting shipped out. We are stripping OUR OWN MOUNTAINS and shipping them to China.

cej102937

Re:That's because domestic oil gets shipped overse (1)

LF11 (18760) | more than 2 years ago | (#39449587)

effectively/effective, welcome to the department of redundancy department, sorry

The most viable solution, IMHO anyway... (1)

Cazekiel (1417893) | more than 2 years ago | (#39449577)

Just opinion: what might bring prices down is how consumers come together on the issue. It wouldn't be a permanent fix--unless it became a regular thing--but if we for just one stinkin' day didn't buy gas, altogether, it would show what control we have. Get enough gas in the days before then hold a national boycott. One dumb day. It'll never happen, however, as the American public is ignorant to their own importance as what they can get done as consumers, too complacent and concerned about their own daily lives to care. We'll bitch and moan but do nothing about it. Still, it'd be nice.

Re:The most viable solution, IMHO anyway... (1)

richy freeway (623503) | more than 2 years ago | (#39449651)

This is a stupid idea. People will either fill up the day before or the day after. The petrol companies lose nothing in the end.

Re:The most viable solution, IMHO anyway... (1)

Cazekiel (1417893) | more than 2 years ago | (#39449703)

What if there weren't fill-ups, but what you'd get anyway minus a couple gallons? Or cutting out one or two days of driving to work and carpooling (my husband does that with my dad to save gas for BOTH of them, as they work in the same city), uses public transport, etc.? Just saying "this is a stupid idea" without putting more thought behind is extremely dismissive, don't you think? I just laid out a base-plan. How it's carried out and plotted requires more than what I'd said, but I'd thought that much was obvious.

Re:The most viable solution, IMHO anyway... (1)

richy freeway (623503) | more than 2 years ago | (#39449749)

It happened here in the UK. It did nothing. We're now paying considerably more than we were back then. It's a pointless gesture.

The reason is in TFA (1)

Chrisq (894406) | more than 2 years ago | (#39449579)

That's because oil is a global commodity and U.S. production has only a tiny influence on supply. Factors far beyond the control of a nation or a president dictate the price of gasoline.

Basically you either have some form of protectionism or you pay the price that world markets will pay for your fuel. A company isn't going to sell it at $2 a gallon in the USA if they can ship it to Europe for $.10 a gallon then sell it for $3

simple supply and demand (1)

night_flyer (453866) | more than 2 years ago | (#39449617)

Just the threat of increased oil production will cause the price to drop...

July 11, 2008 a barrel of oil topped out at $145.08, July 15th Bush lifts ban on offshore drilling and by December of 2008, oil was down to $37.71 a barrel... and that was nothing more than a threat.

As long as it looks like (to the traders) that there is a "shortage" of oil, then they will keep trading high, that's how they make their money.

Re:simple supply and demand (4, Insightful)

weave (48069) | more than 2 years ago | (#39449753)

July 11, 2008 a barrel of oil topped out at $145.08, July 15th Bush lifts ban on offshore drilling and by December of 2008, oil was down to $37.71 a barrel... and that was nothing more than a threat.

Oh come on. Are you telling me that nothing else significant happened in the last half of 2008 that might have affected the supply and/or demand for oil?

Surely you troll (4, Informative)

Goonie (8651) | more than 2 years ago | (#39449771)

Yes, supply and demand is important, but you may remember that a few other things happened [wikipedia.org] in late 2008? Things that might have had a little more impact on the supply and demand balance than the piddling amount of oil that offshore drilling might produce.

really? (0)

Anonymous Coward | more than 2 years ago | (#39449677)

A total lie, why is everyone so against oil? Find another way besides batteries fools or give up the car.

Prices are set by SPECULATORS (0)

erroneus (253617) | more than 2 years ago | (#39449691)

It has been that speculators have been setting the prices and values of just about every important commodity we use. This needs to change. But it won't change because there's too much money being made in these markets.

Thanks and have a nice day.

fungible commodity (1)

Hognoxious (631665) | more than 2 years ago | (#39449711)

Two words: fungible commodity.

If you don't know what that means, Google it.

Prices are higher because we're exporting gasoline (3, Interesting)

HangingChad (677530) | more than 2 years ago | (#39449715)

Why on earth would oil companies sell gasoline here for $2.50 a gallon when they can sell it in France for $10 a gallon? Gas prices are higher because we're selling gasoline overseas [usatoday.com] . Welcome to the global economy.

There's at least one domestic downside to America's growing role as a fuel exporter. Experts say the trend helps explain why U.S. motorists are paying more for gasoline. The more fuel that's sent overseas, the less of a supply cushion there is at home.

I still remember crowds of complete fucking idiots chanting, "Drill, baby, drill!!" Pathetic.

More Biased Statistics (0)

Anonymous Coward | more than 2 years ago | (#39449751)

Yes, statistics don't lie but they can often be molded to convey whatever "truth" an observer wants to see. For example: "Oh of course! global warming is directly impacted by the decrease of pirates in the Atlantic Ocean, eureka!" Yes while there may be statistical correlation between these two things, any person with an ounce of common sense should consult reality before coming to ridiculous conclusions.

The original submitter (and AP) here is implying the law of supply and demand have ceased to exist and do not apply simply because a plot of two data elements produce something else. This is completely ignorant and asinine. The reality of the world is there is FAR more factors to consider when determine the price of oil. Ranging from international unrest, global supply, global demand, local supply, local demand, corporations, speculation, travel, weather, natural disasters, man-man disasters, pollution, new technologies, public policy of each country, population growth, alternative energy usage, cost of transportation of oil, cost of commodities needed to produce oil, economic growth, what kind of cars are people buying, how much plastics we use, and etc, etc, etc... I swear this list can go on forever

Journalists will be journalists because it's their job to spit news every second of the day. It's up to you to figure out you what news is worth its weight in salt. If you wanted to make a solid argument to support for this view what you should be saying is, "demand is outpacing gains in supply, can we keep up?". Now that is a worthy point worth arguing over.

Oil vs. Gold (2, Insightful)

AmazinglySmooth (1668735) | more than 2 years ago | (#39449767)

A barrel of oil when priced in ounces of gold hasn't increased all that much. The biggest issue is inflation, which is 100% caused by loose monetary policy. Monetary policy is set by the need to borrow by the federal government. If the government didn't borrow so much, the Fed couldn't increase the money supply so much.

OECD dictates oil prices (2, Insightful)

Anonymous Coward | more than 2 years ago | (#39449773)

The price of oil (and thus gas) is determined by the price of oil on the market.

If, for example, you had a 1000 hectare farm in Idaho and found oil there, you couldn't just put in a well and get cheap gas or even sell it locally at a cheap price. It needs to be sold on one of the oil bourses at a price dictated by the market.

The US government is pushing the price of oil (and thus gas) up by being aggressive with Iran and destabilising the Middle East (where a large amount of the world's oil comes from.)

Stupid sheeple (1)

Anonymous Coward | more than 2 years ago | (#39449779)

It is easy to understand why so many powerful people are pushing for the New World Order without the consent of the people, when there are so many stupid people.

Drill here, Drill now, does nothing but put more control into the US based oil companies and US government to be able to regulate it. I will NEVER cause a reduction in prices, unless the rich and powerful want to do so, and that will only happen if it benefits them.

NOTHING makes gas prices go down (1)

msobkow (48369) | more than 2 years ago | (#39449785)

Gas prices leap up on the slightest whim of the future's market rising, but they only go down very, very slowly.

As we know now, the whole "shortage" of the '70s and '80s was a lie when you consider shale extraction, so prices should be dropping drastically. But they won't, because there's a oligopoly propping up the prices.

Could someone explain to me why one of the most profitable industries in the world gets tax breaks and subsidies? Clearly with their multi-billion dollar profits, they don't NEED the subsidies and breaks to "encourage" them.

Summary of article (1)

Joey Vegetables (686525) | more than 2 years ago | (#39449793)

Author of article, who apparently fails to undestand that correlation != causation, proposes repeal of the law of supply and demand. Film at 11.

Duh. Price of Oil correlates to value of dollar (0)

Anonymous Coward | more than 2 years ago | (#39449807)

Quit making the dollar worthless, and the cost of oil will come down accordingly.

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