Question: Isn't Drilling for Our Own Oil a Better Option?

Thursday, May 26, 2011

Drilling our own oil improves our trade balance and generates American jobs, so it solves two big problems. But it doesn't solve three other big problems — the price of fuel, our vulnerability to OPEC's whims, and the unbounded wealth making its way from our wallets to radical Muslims.

If we drilled all our own oil, OPEC would still control the price of oil, and therefore would still have the ability to cause worldwide recessions, so it is an incomplete solution, which is completed by the Open Fuel Standard.

The two solutions together help solve all five problems, and they all need to be solved.

People often say, "Well, if we drilled our own oil, we wouldn't have to pay OPEC's price." But the only way this would be true is if we had an American company that was willing to sell oil to American consumers at a better price than the company could get for its oil on the world market. Or if the government forced the American company to sell it to us for less than it could get elsewhere. That seems unlikely.

Therefore, the world market price for oil will determine what Americans will pay for gas. And OPEC is such a large cartel, its production level determines the world price. OPEC deliberately keeps the price high and makes it spike higher occasionally, sending America into one recession after another, and draining us of our wealth. Read more about how this works.

The following is an excerpt from an article in the Wall Street Journal by James Woolsey and Anne Korin:

Oil is a fungible commodity with a global price. Even if the U.S. did not import a drop of oil — or if all, instead of just most, of our imports came from Canada and Mexico — we'd still be vulnerable to the vagaries of the oil market and price manipulation by OPEC.

In 2008, when the world price of oil rose to $147 a barrel, truckers in Britain struck against the huge resulting diesel price. The price skyrocketed even though the United Kingdom was then producing virtually all its own oil...

The cartel that dominates the global oil market sits on 78% of the world's conventional oil reserves. The reason it accounts for only about a third of world oil production is because it is a conspiracy in restraint of trade. When non-OPEC countries drill more, OPEC simply drills less and drives prices back up. If demand is reduced through a one-time improvement in efficiency, OPEC again drills less and prices zip back up...

To outmaneuver OPEC, the market needs to be able to react dynamically. That means giving purchasers of fuel the ability to choose a different fuel at the pump if it's cheaper that day than gasoline or diesel...

One very good way to accomplish this is for Congress to adopt the Open Fuel Standard Act...

Brazilians already have this option: During the oil price spike in 2008, with 90% of their new cars fuel flexible, they bought more alcohol fuel than gasoline.

CBS: "More US drilling didn't drop gas price"

Why You Should Support the Open Fuel Standard Even if You Are Against Mandates in Principle


Anonymous,  March 27, 2013 at 6:52 PM  

I disagree. I believe if America would begin drilling and refining as fast as possible, OPEC would face competition, always a good start. Sure they can quit drilling for a WHILE, but their revenues will go drastically down with reduced sales and eventually, they will have to begin selling again. What this articles misses is the long-term effect of tapping into our huge oil resources, not to mention refining it ourselves and the jobs and low prices that would effect. If America has its own oil in the amounts we are capable of, OPEC would lose much of its influence here and worldwide, and oil would become just another commodity without the ability to harm our economy as it does now.

Adam for Fuel Competition June 10, 2013 at 6:21 PM  

IF oil companies in the United States were able to produce as much oil as 12 of the highest producing countries in the world combined (OPEC) and could sustain it, and IF the growing demand for oil in China and elsewhere didn't keep up with the production in the U.S. and IF the U.S. companies could produce the oil cheaply enough; then yes, it seems likely that oil prices would come down, as long as Saudi Arabia didn't retaliate by producing so much oil that it made more expensively-produced oil everywhere in the world unprofitable (Saudi Arabia can produce a barrel of oil for less than two dollars). But they probably would because what other recourse would they have? Let the U.S. take away their dominance? They have no other source of income to speak of. If they produced oil at maximum capacity they could drastically drop the world price of oil, making most other sources of oil unprofitable, at least until Saudi Arabia ran out, which wouldn't be anytime soon.

Felicity Sanderson April 15, 2015 at 3:49 PM  

That actually is a good point that you brought up in the fourth paragraph where Americans would have to sell to American consumers at a lower price than OPEC. That could potentially be more difficult to be a lower price is what I'm getting from that paragraph, correct? Whatever OPEC does, or any other oil drilling company, they try to make it as affordable and as profitable as they can to make both parties happy. Would you agree with that?

Adam Khan April 16, 2015 at 1:42 AM  

Here's what I'm getting at: Anybody who drills oil can sell ALL the oil they can drill at top dollar. Why would anyone sell it for less?

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