The New York Times’ lead story today offers are lengthy and useful examination of the debate between more drilling, and more conservation and efficiency, in what the newspaper sees as signs of progress toward “energy independence”. Both drilling and efficiency are helpful, but unfortunately insufficient, to achieve this goal. Despite increased domestic oil production and a slowdown in U.S. demand, prices continue to rise, with gasoline now approaching $5 a gallon in some parts of the U.S. This is because oil demand in China, India and elsewhere in the developing world continues to ramp up as these nations rapidly urbanize.
As global demand outstrips supply, the commensurate price increases have substantial impact on those who require gasoline for transportation. Higher oil prices also increase costs of agriculture and food production, raising grocery bills. And the burden falls disproportionately on lower-income families, not just in the U.S., but around the world.
Oil is an internationally priced commodity so more U.S. drilling cannot meaningfully bring down the price. Given the growth in global demand, higher-cost U.S. domestic production will pressure global prices upward, further enriching the much lower-cost OPEC oil producers.
Even in the best case noted in The Times, we may only get to 10 million-barrels-a-day production by 2020, compared to current use of nearly 19 mmbd. The difference between the most optimistic estimates of domestic production and our actual oil consumption leaves us woefully dependent on foreign oil and with it the price swings that devastate our national economy and personal budgets.
In fact, virtually every recession since World War II has been preceded by a spike in oil prices, with devastating consequences.
What we need is a diversity of cheaper, cleaner, American-made and unsubsidized fuels to compete with gasoline at the pump. Viable options include natural gas, methanol, ethanol and electricity.