There is no correlation between domestic drilling and fuel prices.

The Associated Press analyzed 36 years of gasoline prices and domestic oil production and found absolutely no correlation. Increases in domestic production (it’s up 15% from three years ago) do not result in decreases in price. Based on this model, if we increased domestic oil production by 50%, best-case we’d see a 10% reduction in gas prices. If there was a correlation, then a gallon of gas would cost $2/gallon right now. But that’s life in a global market. We can drill all we want in the U.S., but producers are going to sell oil where it’s most profitable to do so, and charge as much as they can. 

Published by Waldo Jaquith

Waldo Jaquith (JAKE-with) is an open government technologist who lives near Char­lottes­­ville, VA, USA. more »

10 replies on “There is no correlation between domestic drilling and fuel prices.”

  1. That study is irrelevant without compensating for global oil consumption and production. (Which it apparently did not do.) Of course it’s a global market, but increasing production will lower prices, unless the Gulf/Venezuela decreases production to match our increase.

  2. This is well addressed in the second and third pages of the story:

    Unlike natural gas or electricity, the United States alone does not have the power to change the supply-and-demand equation in the world oil market, said Christopher Knittel, a professor of energy economics at MIT. American oil production is about 11 percent of the world’s output, so even if the U.S. were to increase its oil production by 50 percent — that is more than drilling in the Arctic, increased public-lands and offshore drilling, and the Canadian pipeline would provide — it would at most cut gas prices by 10 percent.


    If drilling activity rises around the globe for a sustained period of time, gasoline prices can fall as that new supply eventually finds its way to market, but the U.S. can’t do it alone, oil analysts say.

  3. Investors continue to bid up crude oil prices on the not unreasonable assumption that Republicans may just get a new War in the Middle East (ignited in Iran, sweeping into the Arabian Peninsula) bottling up the Persian Gulf, and creating a scramble for the decreased world supply. We are one nitwit stumble away from sky high oil prices AND a new $1 trillion dollar ME war. Maybe some of you responsible rightwing types could ask Mitt/Newt/Rick/Rush to STFU and play for the USA.

  4. I’ve long been amazed that anyone would ever believe that US drilling would lower pump prices. Maybe it’s just that they want to believe it.

  5. I was part of that crowd (believed US drilling would lower prices) until it was brought to my attention that we (USA) are now exporting as much or more than we are importing. So, if everything we get in is just going right back out, then we’ll never have lower gas prices. At least that’s my layperson’s view of things.

  6. It’s truly amazing that people still argue about something that Adam Smith settled long ago. Perhaps Econ 101 isn’t as popular a course as it used to be.

    (if you add more of something to the marketplace, the supply goes up. Assuming demand stays constant, the price necessarily goes down.)

  7. Oil isn’t a widget; price isn’t just based on supply and demand. The increase in drilling (production is at its highest level since 2003) is accompanied by screams of “drill here, drill now, because America’s enemies control our oil supply!”. The later drives oil prices up on fear more than the former brings them down based on supply.

  8. So long as OPEC exists, supply will be artificially reduced to prop up the price relative to demand. The oil market is not free, as a result, and the standard rules of a free market do not apply to it.

  9. Fully fund the Commodity Futures Trading Commission (CFTC)

    Gene Guildford, a former president of the Maine Oil Dealers Association and a Reagan administration Commerce Department official, estimated that speculation translates into roughly a dollar added to the price of each gallon of gasoline bought by the U.S. consumer. “Instead of spending four dollars, you should have been spending something closer to three dollars for your gallon of gasoline,” he said.

    The extra cost to America’s drivers is staggering, Guildford said. “At 11 billion gallons a month that Americans consume, Americans today are paying $10 billion more a month for gasoline today than they did in December.”

    Both men urged the committee to fully fund the Commodity Futures Trading Commission and propose legislation in the House aimed at cutting oil speculation to what is required to keep the markets liquid.

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