Archive for March 25, 2012

Drill, Baby… Why?

by John Weckerle

With all the talk of pipelines and politics in the news, we found it interesting to read about a recent Associated Press (AP) article that examined 36 years of domestic oil production and gas prices.  The AP article reports the conclusions of a statistical analysis that found no correlation between production and prices.  According to the article, domestic oil prices are controlled by the global market and, given that U.S. exports account for a small amount of the global total, increasing our production would have little effect on pricing at the pump:

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.

“There are not many markets where the United States can’t impose its will on market outcomes,” Knittel said. “This is one we can’t, and it’s hard for the average American to understand that and it’s easy for politicians to feed off that.”

Links to articles on the study:

For those who like data – the data behind the study: