Erich M asked in Politics & GovernmentPolitics · 1 decade ago

How would domestic drilling reduce the price of oil?

There is alot of talk about offshore drilling and drilling in ANWR to help reduce the cost of fuel here in America. Firstly, actual drilliing for crude wouldn't begin until around 2018. Now prices are set on the global market, right? So let's say we get more oil offshore and in ANWR. It won't make up for all oil imported in the U.S. Why wouldn't foreign oil companies just slow production to keep prices right where they are and keep the delicate supply/demand balance at it's optimum return rate? You can drill all you want, it won't make up for all the oil the U.S. consumes and all the foreign oil companies need to do is limit production to keep the prices high. I don't see, from a business stand point, how increasing domestic supply is going to affect prices since it won't make up for all the oil we need. Why can't we just concur that this is a business and we really need to stop feeding our addiction? Our dependancy on foreign oil may be slightly diminished, however, we will still need to buy foreign oil to keep us running at our frantic pace. Oil futures are based on the international market, so somebody help me here. Why would a business propose a program to make less money? These are for profit corporations. They want to drill more to make less money? Does that make sense to anyone?

Update:

Leann and Whatthe? The Energy Information Administration states this:

For the lower 48 OCS [Outer Continental Shelf], annual crude oil production in 2030 is projected to be 7 percent higher—2.4 million barrels per day in the OCS access case compared with 2.2 million barrels per day in the reference case (Figure 20). Because oil prices are determined on the international market, however, any impact on average wellhead prices is expected to be insignificant.

And further more:

ANWR oil production is not projected to have a large impact on world oil prices. […] Assuming that world oil markets continue to work as they do today, the Organization of Petroleum Exporting Countries (OPEC) could neutralize any potential price impact of ANWR oil production by reducing its oil exports by an equal amount.

Go to this link:

http://www.eia.doe.gov/oiaf/servicerpt/anwr/result...

Update 2:

Hey, I'm getting great responses, albeit, some are rather misinformed. Go to the link I posted and find out this will truly affect oil prices as stated EIA. (yes, they are bi-partisan). No one has addressed the fact that foreign oil countries will reduce production to reduce supply, thusly, keeping the supply the same as pre drilling.

Update 3:

By the way, the number culprit in stopping offshore drilling is not envir-whackos, as some would like to think. Two Republican Governors vetoed legislation in FL and CA for offshore drilling...they were heavily influenced by the tourism lobby. Lobbyists influence legislation...and no one else.

Update 4:

Eelfins: Water's free where you live? Hmm...I better stop paying my water bill then and drown my lawn, eh?

17 Answers

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  • 1 decade ago
    Favorite Answer

    With the US still being the largest consumer of OPEC oil, if we reduce our purchases it will cause a major action by OPEC. Just the fact that we have been consuming less oil in light of the recent prices, it has resulted in a price reduction already. If we are able to produce more oil and lower our consumption even more, the price will go down to make their oil more desirable and to cause a cut back in our production. This type of thing has been going on for years. The OPEC nations don't want to lose business and they can afford to cut the price of a barrel of oil substantially to insure that they sell their oil.

  • 1 decade ago

    I am trying to understand your logic.

    Forget, for a moment, that we won't see the benefit of new drilling for years because 2018 will be here in a blink of an eye.

    The issue is energy independence such as Brazil recently achieved. The idea is to produce more domestically, have it available at a cheaper price which will create less need for foreign oil. Less demand equals lower prices.

    I don't think most people believe that the solution is to maintain the current demand for oil. Rather, diversifying our energy sources is the real key, and as much as we can achieve domestically will reduce dependence on foreign sources.

    The "time" logic was used, among other issues, to defeat drilling in ANWR. The fact is if we had started exploration three years ago, we would be that much closer to increased domestic supply.

    I don't understand your logic for the last part of your question. If Mobil and Shell are producing more crude, they will make more money as opposed to us buying it from OPEC.

  • 1 decade ago

    Let's look at the logic of your question... If you are right and increasing production of oil doesn't reduce the price we pay for oil... Then why don't we just stop drilling altogether?

    The simple fact is that we need to do whatever we need to do to wean ourselves off of foreign oil. This means making flex fuel capability for automobiles mandatory. This means that oil will have to compete with other fuels and that will bring down costs. Also, battery technology must be improved and implemented as soon as possible. Other energy producing technoligies must be used at an ever increasing level.. Tecnologies like wind, solar, geothermal, etc.

    It is estimated that this year alone we will be sending $700,000,000,000 ($700B) to countries that are funding terrorists that we are fighting in the war on terror!! Does this make sense?

  • Anonymous
    1 decade ago

    We can drill our way out of this mess, we can't inflate our way out of it.

    The amount of oil that will be added (some earlier than 2018) would have several million barrels per day to the world supply.

    * Every single thing you buy gets to market because of oil

    * It will be much longer than 2018 before the sun, wind or batteries will get our food to us.

    * Oil is the very lifeblood of the world economy. ALWAYS WILL BE

    A combination of OIL, alternative fuels and conservation can drastically reduce the price of oil worldwide.

    You logic on "less money" is flawed.

    Fed and State governments are already whining that the decreased gas usage has hurt their budgets for road maintenance.

    Lower price = higher usage. More than makes up for the difference.

    Oil Companies want to drill, always have, always will. The only thing standing in their way is Nancy Pelosi.

    We have more oil available to us through Offshore, ANWR, and shale oil than ALL of Saudi Arabia.

    To severely damage the US Economy on the "hope" that alternatives will be available in the next 10 years is irresponsible.

    Here we are, the largest user of oil on the planet, and we are not drilling the oil under our collective feet. The rest of the world must wonder just how stupid we've been these last 30 years.

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  • Thom
    Lv 5
    1 decade ago

    Foreign oil companies would have two choices. They could either maintain production, which would drop the price of oil, or they could reduce production (to offset our new production) which would drop their sales. Either way they would be making less money, money that would stay in the US. So theoretically they could neutralize our production as you point out, but it's not something they'll want to have to do for the reasons I mentioned.

    It is true that we need to get off our oil addiciton, but whether we like it or not we'll be using oil a lot longer than 10 years from now.

  • Anonymous
    1 decade ago

    I don't know how you can even ask this question. If and when the US decides to start drilling, the price will drop significantly. When oil is actually produced, the price will drop again. It's supply and demand. We have enough oil to stop the Arab oil, and South American oil from dictating prices. What part of this don't people understand? Even if oil prices are speculated ten years in advance, the price will go down. That's what speculation is! All we need is access. Won't someone tell Pelosi?

  • Sean
    Lv 6
    1 decade ago

    Domestic offshore drilling will reduce the price of gas about a nickel in fifteen years. Yippee! There are millions of acres that BIG OIL companies have leases upon which to drill that they aren't using. Besides, there must be a move to alternatives as oil is a finite resource and the future must have some other energy source.

  • Rosie
    Lv 4
    1 decade ago

    Oil prices are high due to stock market "speculators" not for any other reason! By demanding we drill here we will weaken the idea that oil will be in short supply. If they (speculators) think there will be more oil then they stop driving the stocks up. This is the same reason the prices go up when ONE measly pipeline is disrupted. To put it simply this is more of a mental game than actual supply/demand issue.

  • 1 decade ago

    Offshore drilling in the Gulf of Mexico, off the Florida coast, and off of the coast of California can get us results much more quickly, in as much as a year or less. Most of the infrastructure is already there from the mid 80s.

  • 1 decade ago

    You are right. Big oil is the champion of the cause for offshore drilling because they want to make even more money. They want us to think that oil is the only way to go and since we are drilling here at home we don't have to worry about alternative sources of energy.

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