‘We can’t just drill our way to lower gas prices.’ Oh yeah?!

GasPrice

But you and I both know that with only 2% of the world’s oil reserves, we can’t just drill our way to lower gas prices – not when consume 20 percent of the world’s oil.

– Barack Obama, March 10, 2012

Oh, really?

In the eighteen months since that misleading pronouncement, the U.S. is poised to surpass Russia and Saudi Arabia as the the #1 producer of oil and natural gas. The boom in domestic production continues, with oil production at levels not seen in a generation. Demand is soft, oil inventories are high and refinery utilization is low.

And guess what? Gasoline prices are dropping.

Color me unsurprised.

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Source: Energy Information Administration
(http://www.eia.gov/oog/info/twip/twip_gasoline.html)

The scale of that graph masks the fact that the average price of gasoline is down 33¢ per gallon over the last 12 months and 70¢ per gallon since the spring of 2012. The reader should also bear in mind that the retail price of gasoline has embedded state and federal taxes which vary from 35¢ to 70¢ per gallon, depending on jurisdiction.

U.S. expected to be largest producer of petroleum and natural gas hydrocarbons in 2013

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The U.S. Energy Information Administration estimates that the United States will be the world’s top producer of petroleum and natural gas hydrocarbons in 2013, surpassing Russia and Saudi Arabia. …

Since 2008, U.S. petroleum production has increased 7 quadrillion Btu, with dramatic growth in Texas and North Dakota. Natural gas production has increased by 3 quadrillion Btu over the same period, with much of this growth coming from the eastern United States.

Data Source: eia.gov

Data Source: eia.gov

From Bloomberg:

WTI crude falls near four-month low as U.S. inventories increase

West Texas Intermediate crude [WTI, a price benchmark] fell to the lowest level in almost four months as supplies rose more than expected in the U.S., the biggest oil-consuming country. Prices dropped as much as 2.2%. … [Oil] Stockpiles at Cushing, Oklahoma, increased for a second week and domestic production jumped to the most in 24 years.

“Fundamentally, it’s a weak market for WTI,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “Everything points to lower prices.”

U.S. crude production grew 6.3% last week to 7.9 million barrels a day, the most since March 1989.  …

Refineries operated at 85.9% of capacity, the lowest level in almost six months. Total petroleum demand dropped 3.8% to 18.3 million barrels a day. The four-week average was 18.7 million, a 17-week low. …

The oil patch is one of the bright spots of our economy. Since 2009, the industry has been a true engine for jobs. But declining prices, especially for natural gas, have served as an organic non-governmental stimulus that has benefited the broad economy:

Newly found sources of domestic oil and natural gas are having an even bigger impact on the economy than first projected, adding more than $1,200 last year to the discretionary income of the average U.S. family, a new study says. …

More domestic production is also slashing crude oil imports, which fell 19% in the first half of this year, according to the Census Bureau. That shaved $31.6 billion off the nation’s trade deficit. [Source.]

Speaking of the trade deficit, refined petroleum products including gasoline and jet fuel are now the nation’s #1 export.

The potential benefit of domestic oil and gas self-evident. It’s a shame that our political leadership fights it at every turn.

Cross-posted.

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