The Drill-Baby-Drill Fallacy

Puzzle: Why is the price of gas up, when drilling is up?
  1. It was $1.00 under Clinton when drilling was lowest.
  2. It was $3.30 when drilling peaked under Bush.
  3. It was $3.90 with drilling sky high under Obama. 

What’s Wrong with the Drill-Baby-Drill Theory?


Newt-$2.50-Gas-Price.jpgNewt_Gingrich.jpg
Newt’s $2.50 gas for China⇒
  1. It’s only about US Oil Supply (drilling).
  2. But supply and demand determine the price.
  3. What Newt told Fox News: “I have a $2.50 goal as a maximum price. … we outline step by step how to do it. I think it is doable.”  Doable?!  $2.50 for gas means $1.50 for oil (see the Iron Rule). And $1.50 times 42 gallons/barrel = $63/barrel — a little over half what it costs now. And Newt will make that the maximum price of oil for the world from now on. Sure thing, Newt.

Here’s What Happens Instead:

  1. Demand for oil goes up (think, China, India and Japan).
  2. The price of oil goes through the roof.
  3. Big Oil smells profit and starts to drill like crazy.
  4. Drilling keeps the price about a nickle lower than “it would have been.”
  5. You get the nickle, Exxon gets $10 billion.

In a nut shell, here’s the awful truth:

  • China uses more, and Our gas price goes up.
  • We use less and drill more.
  • Exxon ships the extra gasoline to China! — See for yourself.

zFact:  The price of gas equals the world price of oil (per gallon) + $1.00. (Strange, but true for 30 years.)