Why don't we drill our own oil?
We are getting raped at the pump and oil companies are due to release earnings which are projected to be records...of course
Given our economy and lack of jobs specifically...
Why don't we drill more of our own oil?. If we were to subsidize imported oil with our own even driving the price back down to ~$2.50 a gallon while hiring thousands to work for this operation...it would spike our GDP (think of the multipliers)
Furthermore, the profits realized, aside from alleviating some of our debt issues, could subsidize the green movement and invest in alternative power.
Seems like a no-brainer to me. Why don't we do this?
Supply & Demand
I hope the US never drills for oil, more money for me ma fuckas
The vast majority of the oil we use comes from Canada and the US (with Saudi Arabia providing oil for political reasons). The reason we aren't drilling for more oil in the US is because of government prevention (ANWAR?). As for why the government doesn't actively drill its own oil, I can only guess that the political pressure is too much. Can you imagine the outrage if the government was drilling for oil and charging fair market prices that are above $4 a gallon.
......This way no one truly has us by the balls.
@gekko21 "government was drilling for oil and charging fair market prices that are above $4 a gallon."
I know we drill but wouldn't the additional drilling allow for our government to charge its citizens with below market price? - act like a subsidy?
In this country any oil drilled by the government that is >$0 is probably "too high" a price to a politician. There is also the question of how that oil that is drilled by the government is delivered if it is at a "below market price". The cost of gasoline is basically cost on inputs (oil)+refining costs+transportation costs+taxes. Who would get this cheaper oil. Any gas that is refined from government oil could be sold at a lower price and would undercut any companies that didn't have government oil and would put them out of business.
The best thing you can do is limit all the environmental red tape that exists and let oil companies start drilling more.
Uh yeah that's a great idea. It's totally safe anyways, right?
Ah da da, greetingz fellow comrade, I see you are a fan of the planned economy, good that is good, we shall drink vodka to that. The capitalist pigs should learn from the glorious soviet 5 year plans
Oh, if the food prices go really high we can set up kolkhoz farms and if you no work then you be sent to gulag.. on aljaska.
The thing is, high oil prices reflects supply/demand and if we make oil cheap, those who need it the most won't be able to get it. That would hurt the economy more than just high oil prices.
^^^this implies the government acts logically.. and is economically efficient...
We drill about 7 million of the 20 million barrels we use each day. Gekko is right, we get the most from Canada (followed by Mexico, then Venezuela, Saudi Arabia and Nigeria in no particular order).
The reason we don't mostly has to do with environmental policy.
Have you read up on the Bakken? Google it.
America has a lot of unconvential oil that is high grade that can be drilled using hydraulic fracturing and other new methods. The problem? There is absolutely no infrastructure, cushing is full and has been full for a while.
They are moving the bakken by flippin trunks basically at this point, every other method/pipeline is full. Yet the US Government is almost blocking "Key stone" right now.
You need infrastructure to move and drill unconvential oil. Unlike the OPEC nations where you can just swim in that stuff.
There are actually plenty of companies just bitting at the chance to get their hands on a couple of land permits to begin fracturing for shale. They have millions of dollars in backing and enough equipment to replace the US army engineers.
The real problem is that fracking completely screws with the ecosystem and can have very serious effects on not only wildlife but people too ( the chemicals it puts into the ground and ultimately the water supply has been proven many times to cause cancer in humans). I am not some big environmentalist but what shale does to the environment is even beyond what I would put up with for cheaper gas.
I am from Pittsburgh (the epicenter of where shale would be drilled for) and around here no one wants to see Marcellus Shale or Consol Energy come in rip up the hills and poison everyone and everything within a 100 mile radius. People are constantly speaking out to politicians about how little anyone wants to see shale drilling begin. Trust me I want to see cheaper gas but shale is just not the answer.
do you have evidence of this? I'm not saying it isn't true, but having watched gasland and then reading into how much nonsense was being passed off as fact in that movie I am a bit skeptical about the environmental dangers of this technology.
fracking happens THOUSANDS of feet below the water table, nothing in fracking fluid even gets close to the water supply.
Marcellus shale is the name of the formation, how can it come and "rip up the hills"?
The U.S. and Saudi Arabia are actually pretty close in terms of daily oil production. Only difference is that we're at full capacity and they're not.
The U.S has also been sporting a pretty significant emergency oil reserve and inventories are rising have risen to nearly 360 mmb.
If anything the U.S might need to import more oil to augment domestic supply since U.S crude imports are down over 1 MMB/d over the past 3 years. Although my memory of the demand picture is a bit choppy so I can't say for sure but if going into backwardation is any sign, demand looks healthy but might be curbed if prices keep rising.
We aren't allowed to drill where it would be best/easiest. There is basically a moratorium in the gulf and most of the drilling has been forced further offshore into deeper and more technically complex areas. America does have massive shale oil reserves in the Bakken as mentioned, but it is only economically feasible at >40 a barrel. Ultimately what we need is to recognize that America's first priority should be energy independence and after that we can transition to "green energy" not the other way around. I'm pretty sure most people on this board, myself included are too young to remember the OPEC boycott, but that's the real reason to want to be energy independent, although the Canadians and Mexicans are a bit more friendly than the Muslims.
We do drill for a lot of our own oil and we get even more from Canada. The USA is actually an oil exporter and exports up to 9% of its drilled oil. The reason oil is this expensive is because of a week dollar and a whole lot of speculation. Their is absolutely no need for a gallon of oil to cost $112 other than the former reasons.
Also Have you completely forgot about the BP oil spill. After that Obama put a stop on all new drilling permits for off shore drilling. With out being able to drill more in the Gulf and fracking ( the procedure used to drill for shale) pretty much putting cancer causing chemicals right into our water supply you better just hope that we find a completely new and different energy source that won't be speculated on like oil is today. That is the only way we will ever see cheap energy again.
The US buys oil from Saudi Arabia at a preferential price, very slightly above the costs Aramco inccurs to produce the final product (crude oil). What are Americans complaining about?
absolute nonsense, Aramco's production costs are in the single digits per boe and yet their revenues are far closer to the opec reference basket. the only price that is slightly above cost is the oil prices in Saudi Arabia. It is why Aramco/Saudi Refining/Motiva etc. make so much money for the Saudi's.
Ok. Here it is let me give it to you plain ad simple. They are RESERVES they are there for when the day when we truly need them. ok? GREAT!!! now u know!
About Oil and Speculation: Goldman had two good notes the other week. First explaining how they think speculators have added in a risk premium to the Crude price based on MENA/Libya and other supply problems. Then 4 days later they posted another that "Global demand is still out-pacing Global Supply". So I could see maybe $8-$15 premium but that is it, the rest is China/Demand/etc demand growth. Oil is not going to $20 anytime soon and it going to $120 is a lot more sensible.
So drilling at $40/bbl globally in the unconvential plays makes a lot of sense.
About Fracing and Safety: When we talk marcellus were mainly talking natral gas reserves. You think fracing wrecks the water supply and environment. You know what is a 100x worse? Coal, the last coal disaster 20 people died. Coal is way worse and dangerous.
The US needs some assembelance of a real energy policy. Since no one wants nukes (they blow up), no one wants coal (horrible for environment) and now no one wants fracing/shale plays (evil to the water supply). So how are pepole going to heat their homes and drive their cars?
Plus no one said let's go drill in Pittsburgh or Montana where the cabin country is. There is though lots of areas of PA and North Dakota that I do think people need to necessarily live near and the risk of fracing could be controlled. Just like all the Marcellus drilling in PA. Lastly without the shale/Marcellus could the state of PA even come out of the recession? Really what other industry they have to turn away investment $$$?
The moment you untap the reserves, you affect the long-term volitatity for oil prices. Your doing something to curb production cuts today while risking future Demand out-pacing supply faster. This is the same reason Saudi Arabia doesn't go and drill like mad just when the price rises.
So let me get this straight what your saying is that it doesn't matter wether you pollute half a state to hell, kill a few dozen people, and relocate an entire rural population if that means your making money???I guess if your just down right greedy but its not the way I would go. But maybe thats just me. or maybe its just about everyone else in the state of PA that cares about the type of world they live in.
Also about the coal what you should know is that a one time mining accident and purposely dumping dangerous chemicals long term for years into the environment are two completely different things. Yes mining for coal is dangerous and dirty but that doesn't mean since we are doing one bad thing we should just say fuck it and go all out like theirs no tomorrow.
What we need to do is put some serious money into alternate energy sources. Because even if we do decide to frack for shale what happens when that runs out? We will be having the same conversation except next time their wont be such an easy (but heartless) decision.
Oil companies do not make money off the gasoline at the station level. In many cases, selling gasoline is actually done at a loss. The real money at the station level comes from the poors who buy their groceries there (beer cigarettes, milk, etc. )
Now hurry along and forward your boycott exxon email to the white house (or maybe Barry sent it to you?)
Can you elaborate on this? I was under the impression they take a decent cut. Like in the range of 10%. Nowhere near as much as the government makes but still.
Don't most oil companies not even own their actual gas stations. I remember reading that during the BP spill fiasco that the people boycotting BP's gas stations wouldn't do a damn thing to BP because they don't actually run the stations. It was my take away that BP, Shell, and Exxon just sell the gas to the stations and then the stations are owned by a third party. Could be wrong on this but that was just my takeaway.
Don't most oil companies not even own their actual gas stations. I remember reading that during the BP spill fiasco that the people boycotting BP's gas stations wouldn't do a damn thing to BP because they don't actually run the stations. It was my take away that BP, Shell, and Exxon just sell the gas to the stations and then the stations are owned by a third party. Could be wrong on this but that was just my takeaway.
there are a ton of gas stations without convenience stores, i dont think they are selling at a loss (but yea margins are slim).
Because American oil is more expensive to produce and refine than oil from other regions of the World. The 2nd half of the 20th century has seen American independent producers lobby the government for subsidies for American oil and/or quotas and taxes for foreign oil. I think Eisenhower has taken policies in this direction. Major oil companies and OPEC countries have lobbied in the other direction for quite obvious reasons.
Drilling for oil in the U.S. is a strategic and economic inanity that only short-sighted politicians and business men (obviously they all have a vested interest in the thing) push forward.
@ Rickycross - If you want to trust the Saudis as to whether they have the 2m barrel of spare capacity they claim good for you. In addition this spare capacity is heavier crude for which there is no spare refining capacity.
Come back when you have experienced EU prices at the pump! Try over $8 a gallon. You Americans don't have it bad at all :)
And that folks, is called talking out of your ass. "No one wants to see Marcellus Shale come in rip up the hills and poison everyone" LOL
Btw how many proven oil reserves in US? is it feasible to drill at the current crude prices with the current technology and political sensitivity (i.e Alaska)? Sometimes it is cheaper to import than drilling your own oil.
And to subsidise the oil price is like to burn tax payers money.
As we all know crude oil prices trading at higher premium due to security of supply, geopolitical uncertainty, your beloved Goldman and hedge funds, and how much spare capacity to absord any event of distrupted in supply i.e pipeline burst, kidnaps the oilmen in Nigeria (i used to believe it was evil plans from oil companies to boost the oil prices, but nevermind.), typhoon with the name of lady, another environment disasters from BP etc etc etc...
..So even though your backyard suddenly becomes the oil well, i dont think your pump price gonna be significantly cheaper than it currently is. Unless USA decided to turn into socialist country, forgo the opportunity for profit and declares subsidy is a must. I dont think so..
There are few misnomers in the oil debate: 1- The US doesn't produce enough: The US does produce a lot for the country. We are our own second producers behind Canada and ahead of Venezuela then Golf countries. We are producing at a slightly lower intensity because we reserve a ton of it, what OPEC countries don't do a the same rate. 2- More offshore drilling would reduce cost: Yes and No. No sane companies would want to sell the oil at less than market price. Just doesn't make sense. Surely having more supply would have reduced the price, however, keep in mind that the price is 90% dictated by OPEC. Why would a company sell oil in America at $80/barrel when they can sell it at $100/barrel in Europe? 3- Another thing people haven't look at enough: does it cost more to produce it here than importing it? 4- Politics: Even though we all would love to have cheaper oil, none of us would want to be forced out our own home because a company wants to drill 10 miles away. People just will give the government a hard time to drill. 5- Practicability: maybe the best way to cope with that is to reduce our dependence from oil. If cars and machinery were 40% more efficient, probably the price of oil would have been 30-50% cheaper.
XOM produces only about 3% of the world oil; even majors are not price-setters - they are price takers.
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