Can someone explain to me why getting more oil from domestic sources would drive cost down?

[no limit]

I keep hearing this argument. Now, I'm not some brilliant business man; not by a long shot. But I do know that from doing freelance work I will tend to go where people will pay me the most money.

So if big oil is getting it's production from the USA instead of from Canada putting aside shipping costs and terrifs (which can't be that huge) why would big oil sell to Americans cheaper than they would to other markets? It seems like if all the demand is in China and China is willing to pay more prices will be driven by that; not by big oil's patriotism (as far as I know they have none).

Are there some kind of regulations I am missing here?

[LeftinOH]

1. It won't -but it'll demonstrate (eventually) how more domestic drilling doesn't

matter, so the RW will finally shut up about it (?)

[nuncvendetta]

5. and in proving the point...

in the meantime the fragile Southeast and Florida marshes and estuaries will become irreparably harmed like Louisiana's? That's not a hands-on science lesson I want to conduct.

[polly7]

32. But it's fine that Alberta's tarsands area, lakes and the environment

is harmed to keep up demand? I don't get it. Please explain why that's alright and why we're receiving no help in fighting this atrocity? Why is ruining our environment to supply dirty oil, costing us more than its making .......... acceptable to those buying it? People hate Chavez too and accuse him of all sorts of things, yet his oil is welcome, Hussein's oil was de-nationalized, making it accessable and destroying a nation and millions of people in the process ....... why is this all ok?

[Javaman]

35. because it's out of sight and out of mind.

people in this nation love to bash the saudis, but the reality is, Canada is our largest supplier of oil.

and as long as they can extract it by any means necessary, that's just fine as long as it's someone else's lakes, forests and people that get polluted.

Brown people evil. pasty white folks to the north who love hockey and have national health care, A-okay!

I know, it makes no sense.

[Statistical]

39. DING DING DING DING DING. We have a winner.

The reality is most of America wants $1.00 gasoline without any dirty oil rigs or refineries.

For a long time we (worlds greatest energy hog) sopped up world supply and the world was happy to keep producing more oil because we would buy all they could sell.

However two things have changed:
a) peak oil. countries that have produced the most and no getting depleted and production will decline
b) news kids on the block. India, China, and latin America is growing massively and demand is skyrocketing.

Either:
a) we get off oil or massively reduce oil consumption.
stuff like forced carpools, vehicles less than 50mpg are illegal, massive tax say $2-$3 per gallon on gasoline)

b) world (including US) increases supply.

c) we accept oil will be $200 per barrel and some day we will look back fondly at "cheap" $147 per barrel oil.

However a,b,c, is a harsh reality most Americans want to pretend doesn't exist.

[tridim]

47. Do you really believe the Democrats will allow drilling in "fragile marshes and estuaries"?

:rofl:

[n2doc]

7. They'll never shut up

Facts don't matter to them. Proof doesn't matter. The only thing that matters is getting their demented way on every subject.

[DrDan]

2. sure - because now the oil co's will have more oil to export - so in gratitude, they

will be lowering prices for us in the U.S.

[no limit]

4. So I'm supposed to turst that they will be generous to us?

[DrDan]

33. of course they will be - have you reason to doubt?

[activa8tr]

46. I never doubt the word of the oil and insurance companies and all Republicans...

Ok OK, where is that silly sarcasm icon???

[Blecht]

6. good one

That's funny -- a corporation showing gratitude. LOL!

[gmoney]

3. Are any of the oil companies even US owned any more?

I know Marathon/Speedway stations are still US owned, but I don't know if they pump their own oil.

Might help offset trade imbalance a little as we continue to export raw materials instead of finished goods.

[Ian David]

8. If we supply more of our own oil, the following will happen

1) We will still consume as much (or more) oil than before.
2) We will import less oil from foreign countries.
3) The foreign countries will raise their prices, so that we're still paying as much for oil less of their oil as we were when we were getting more of their oil.
4) Rather than undercutting the higher cost of foreign oil, domestic oil will be priced higher to make more profit.

[obxhead]

15. hmmm, The way I understand it we export almost every drop

we drill for here as it's not the high quality oil we find in the middle east.

[Ian David]

16. You may be right. IIRC, we export more domestic oil than we use. n/t

[obxhead]

26. I guess one could claim we put more oil into the market

therefore lowering costs overall, but somehow I think that by the time we actually start getting this oil it will be just a tiny drop in the global oil demand bucket.

[Ian David]

28. Foreign suppliers will just jack-up their prices to make up for selling less. n/t

[Javaman]

37. Yes and no....

1) We will still consume as much (or more) oil than before.
-Maybe yes, maybe no. I would like to believe, that there would be conservation limits put into place. I can dream. Because in a few sort years, we will need to import oil again to replace what we rapidly sucked up from the new areas. Plus, it will be a good 5 to 10 years before any new well starts producing in any quantity. And given the growth of use rate by china (last reported 5% year on year oil use growth), we will be in a much worse situation later when we have to go back to whom ever we cut off before.


2) We will import less oil from foreign countries.
-Yes, and our trade deficit will also decrease. Almost 2/3's of which is due to importation of oil.

3) The foreign countries will raise their prices, so that we're still paying as much for oil less of their oil as we were when we were getting more of their oil.
-Maybe yes, maybe no. Given china's growth and demand for oil, the price will probably remain, (within reason) where it is. It will only go up, due to wells bottoming out. Since the establishment of a bourche in other nations, the US dollar is slowly being unhitched to the price of oil. Granted, it still is right now in a big way, but if we were to cut off our imports for any reason, expect inflation here and the price of oil globally to go up for us. However, since china's currency is grossly undervalued, a drop in value for the US doesn't bode will for china since they hold a huge chunk of our debt.

So it's in china's best interest (growth, oil use, US debt) to make sure that the US continues to import a measure of oil. (also from a trade stand point) Our dollar drops, they don't export as much crap to us.

It's a very interesting balance.

4) Rather than undercutting the higher cost of foreign oil, domestic oil will be priced higher to make more profit.
-Yes, the price here will certainly go up because our energy sector isn't nationalized. And because we are cutting off imports, the priced charged by big oil will have to be raised in order to appease the stock holders who were used to high returns. Domestic oil should be cheaper for a number of reasons, but that same cheapness will be big oils undoing, so the price, as you say, will go up.

[Ian David]

44. Someone should make a computer program as easy to use as SimCity to model this. n/t

[Javaman]

45. That's a really interesting idea. nt

[barbiegeek]

9. Will it help to get out of OPEC monopoly or lower $$ due to

transportation shipping costs from Persian gulf? Where is most of it anyway--ocean or land?

[no limit]

10. Most of our oil comes from Canada, so I dont think transportation is that big of a deal

when it comes to costs.

[Romulox]

11. It's basic supply and demand. More supply = lower price,

(if and only if demand is kept constant.)

[nuncvendetta]

14. does that theory hold when someone has a controlling stake in the product?

Since we're just a drop in the bucket to all the Mideast oil holdings, can't OPEC just hold back supply in order to inflate prices to keep the profit maximization going? Supply/demand adjustments only work in competitive environments, which the oil supply market will never be even if we tap all of our resources.

[Romulox]

19. Agreed. Opec is a price-fixing cartel. And demand is extremely "elastic".

So the simple case of supply and demand doesn't even begin to explain the complexities of the situation. Nevertheless, that's the basic idea.

[Javaman]

40. Exactly.

The concept of supply and demand in the traditional sense should hold true, but when you add in the corps that ship it and refine it, the picture, certainly gets a bit more muddy.

Combine that with the rising demand (5% oil use year on year) and that they hold a chunk of our debt, the concept of supply and demand gets a bit skewed.

I certainly do believe that OPEC does control prices, but those same prices are also no longer based on something simple as supply and demand, it's also now based on who controls the money.

Since all oil is basically traded in US dollars, it's in OPEC's best interest (at the moment) to keep prices affordable until some other monetary unit replaces the dollar to a certain extent.

China knows this very well. This is why they are actively making deals around the world with oil producing nations.

I wouldn't be the least bit surprised to see the chinese currency slowly being phased in as the new bases for oil prices.

I would love to believe that the euro would make a serious bid, but the growth in comparison of Europe to the growth of China is night and day.

[jtuck004]

12. It won't.. That's a smokescreen. The real reason is to create domestic

jobs that will bring money to those nearby states. Most of what I have read says there is not enough to make a real difference in production and supply, and it won't make any difference in demand at all, which are the common drivers in price. It may not even be as easily recoverable as other sources.

It could also be part of Obama's "bipartisan" strategy. That has been a real positive for us so far.

It may also be a preemptory move. We are likely to see higher gas prices soon, and it could then be said that we are already doing something to combat that. Not as effective as creating new electric vehicles and pushing work-at-home strategies and trying to take the lead in new solar energy technologies away from China and reducing the oil used in the products we have and several other things. But it's easier than the hard work of real change.

[whattheidonot]

34. correct.

a car for everybody simply will not work. the economy will not support it especially if we continue our present global type economy. even changing the economy, the car for everybody has to go.

[Javaman]

42. "a car for everybody simply will not work. "

You are right. That is why I'm watching what happens in china as their use of oil increases dramatically due to their enormous uptick in use of autos.

Many economists are whispering about the "china bubble". They are building at such a rate that many question whether or not their economy will be able to hold together as oil runs out and the price if it goes up.

[Historic NY]

13. Well the whole corn thing isn't working, it drove up food costs.

[barbiegeek]

27. Well, the 5 yr midwest drought followed by flooding didn't help either

[RollWithIt]

17. Economics 101: Supply equals less demand equals less cost

Think they teach that first.

[Tailormyst]

24. That would only make a difference if the supply was going here.

More then likely it will end up in other countries.

[Winterblues]

18. Here is a scenario I can live with

We grant leases to the oil companies that want to drill, and then we charge royalties on the oil they get. We use some of that money to invest in green energy technology and within a few short years we cut our oil consumption by fifty percent. Our costs would come down drastically and our economy would flourish because everyone would have a little more money to spend..In this modern era we are pretty much fool proof with our drilling technology and it is very doubtful there would be spills. It is a matter of putting the pros and the cons on a scale and going from there..

[barbiegeek]

29. Me likey. Good idea

[barbiegeek]

30. If we use up our oil then we have to switch to green right?

[Cleobulus]

50. That scenario only works if there's enough oil there to even bother getting royalties off of.

There isn't, to put it bluntly, not nearly enough to fund a project of the magnitude you mentioned.

[DoBotherMe]

20. Only if we nationalize what remains in our

territories. IMHO. Dana ; )

[moondust]

21. Negligible effect.

Unless there is a law that a certain percentage must remain in the U.S. market, I assume it will end up in the world oil market where it will not be enough to make much of a dent on prices.

[Javaman]

43. you are right.

The concept of cheap domestic oil is a pipe dream. Exxon can't make as much per barrel domestically, so they will indeed ship it over seas.

[Tailormyst]

22. it won't. it's not like the oil is required to be sold to Americans.

The Oil companies will be richer as they sell to the highest bidders.

Again, corporations over people, what a disappointment this president and congress have become.

[Possumpoint]

23. Not Going To Make You Happy

As of 2008 we produced 8.5 Billion Barrels a day and our current usage is down to 19.1 Barrels a day because of the recession. The balance of payment problem that causes isn't sustainable. By producing more of our own oil, less money goes out of the country. Any oil we export is then a credit against what we import.

We as a country have been spoiled when it comes to our energy consumption. Little to no effort has been made towards conservation except when the price of crude becomes excessive or the supply is reduced.

[karynnj]

25. It won't by much

The US production is a very small part of the international production - and it is a global commodity. In addition, there is just not that much oil they can extract.

[fascisthunter]

31. unless it's nationalized, I see no benefit, but only to the oil businessmen

[Javaman]

36. Because our energy sector isn't nationalized, there is absolutely no reason to

believe that the price will ever go down.

In fact, exxon will probably say something along the lines of, "since we had to scrap all of those oil tankers so we can drill about 10 years of oil to pacify the republicans, we now have to raise the prices due to not having to ship the oil".

My brain hurts after that.

[Statistical]

38. Supply & Demand.

More Supply ANYWHERE IN WORLD vs. Same Demand = Lower Prices (for entire world).

However more likely since demand will continue to skyrocket (India, China, Latin America) more supply & more demand means prices will go up less than without more Supply.

[JVS]

41. More drilling increases global supply, which is a downward pressure on prices.

There is also the political element of OPEC to be considered. The more oil produced outside of Opec and opec-friendly countries, the less they are able to manipulate the price.

[mike_c]

48. it will not have any impact on consumer cost at all...

...but it will increase oil company profits by allowing them access to additional inventory.

[Cleobulus]

49. It won't, it will be a drop in the bucket compared to what we consume every year.

It may lower gas prices by 5-7 cents in the next 20 years, and that's iffy, all by itself.

[DailyGrind51]

51. The world-wide price of oil would decrease due to greater supply.

The U.S. sometimes trades domestic oil for foreign oil based on sulfur content of some domestic oil.

[unblock]

52. this sounds good in theory, but it's true only by a very slight amount, for several reasons.

first, the price of oil is far more sensitive to changes in demand than it is to changes in supply. adding supply only causes a relatively small price drop.

second, the amount of oil we're talking about from additional off-shore drilling is itself small compared to the world supply, so the expected initial price drop would be small anyway.

third, the price of oil is hardly free from manipulation, most obviously by opec. opec would very likely respond to a price drop by cutting back on its own supply in order to keep any price drop small.


so the only real advantage is shifting the business from opec countries to america corporations.


and long-term, of course, this is CONTRARY to our national and economic security. there's only so much oil left, and if we use it NOW it's not there LATER when we will need it EVEN MORE THAN WE DO NOW. if we encourage the saudis to cut back on production, that means the saudis will have all the more later when we run out.

[xynthee]

53. Because all corporations follow the laws of supply and demand

and would NEVER charge more for a good / service than it's worth just because they COULD.