Obama Drilled — It Didn’t Work (except for Exxon)

Obama has presided over the biggest oil-drilling surge in 30 years! Just look at the graph. But, the crazy thing is that when we drill more, the price is higher. And, check the graph, when drilling was lowest the price was $1.00 per gallon!

drilling-vs-gas-price.png

This Is Not an Accident — When Drilling is Up, Price is Up.

The same thing happened last time drilling set a record, in 1981. The price of gasoline was through the roof. The reason is that there are two much stronger forces at work:

  1. Oil production in the rest of the world (the US is only 10%)
  2. Oil use by the world, especially in China, India and now Japan.

What’s happening now is mainly increased use in China. That pushes the price up a lot, and then we drill and bring the price down a little—so little you can’t even notice. And we bring it down for the whole world, not just for the US. So more drilling is good. It makes lots of money for Exxon and BP (which needs it to pay for damaging the Gulf). But there’s no use wrecking our environment to lower the price of oil for the rest of the world.

Because the price is high we use less gasoline, which actually helps bring the price down more than the drilling does. And because we use less gasoline, and this is a world market, Big Oil sells the gas to China etc. (see graph).

The big mistake in the Drill-Baby-Drill logic is forgetting that oil and gasoline are world markets. But, for at least the last 25 years, the price of US gasoline has equaled the world oil price (per gallon) plus $1.00/gallon (see graph). There’s really nothing Gingrich, Palin, Romney or Obama can do about the world oil price — unless they could get the world to use less oil.