(Photo courtesy of the U.S. Department of Energy)
With the average gas price at $3.83 per gallon, Americans are feeling pressure at the pump so far this year.
But public cries for the U.S. government to bring down oil prices in the next few months are unrealistic and show a lack of knowledge of the world’s oil market, said Sam Shelton, research program director at Georgia Tech’s Strategic Energy Institute.
Oil is an international commodity. The world’s oil supply and demand sets the worldwide price. No matter where in the world the oil is produced, the cost is the same. Bringing down oil and gasoline prices in the U.S. requires bringing them down worldwide.
The U.S. does not have sufficient oil reserves to impact world production and drive down the world price. That includes areas not currently open for drilling, and new reserves take seven to 10 years to bring on line.
Saudi Arabia is the only country that has enough oil production capacity to swing the world market, Shelton said. The country unilaterally reduces or increases its production to maintain a target world price, which is currently stated to be between $90 and $100 per barrel.
As the world’s largest consumer of oil, the U.S. is left with only one legitimate response to reduce price: We have to reduce demand.
Still not convinced? Here are some sobering facts about the U.S. domestic oil production: Production hit a peak in 1970 and has trended downward since then. In 2008, it hit a 60-year low at one-half the 1970 production rate. Today we’re producing oil at about 57 percent of the 1970 peak rate.
It’s not that we haven’t been trying, Shelton said. Since 2008, active oilrigs operating in the US have dramatically increased from 380 to 980. More effort and expense are required because it’s continually harder to extract the remaining oil reserves.
The worst part is, even with the recent increased production, the U.S. still consumes three times more oil than we produce. For our national security and economic health, we have to get serious about a long-term energy policy based on the facts, Shelton said. These facts are freely available at: www.eia.doe.gov.
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