[OKC] Why US oil production gains are like water pumps on the Titanic

[Bob Waldrop]

Even though the “oil is plentiful” propaganda is everywere, the actual data tells a different story.

Bob Waldrop, OKC

http://blog.chron.com/lorensteffy/2012/03/why-u-s-oil-production-gains-are-like-water-pumps-on-the-titanic/

Why US Oil Production Gains Are Like Water Pumps on the Titanic

I filled up yesterday for $3.88 a gallon, which was 4 cents more than what I paid four days earlier. Consumers are painfully aware that gasoline prices have been on the rise for the past few months, and while such increases had been predicted since last fall, no one’s happy that the predictions proved correct.

Because this is an election year, rising gasoline prices are fueling political rhetoric. President Obama has hit the road to tout his energy plan, which he outlined in his State of the Union speech in January. 

Missing the boat: the political debates over gasoline prices ignore the bigger problem (AP)

Meanwhile, his opponents have argued his policies are driving up gasoline prices, even though presidents have little power over pump prices. The oil industry, though, claims that if it got its way, all problems would be solved. It favors more drilling, fewer regulations and lower taxes. 

Yet domestic oil production has increased 15 percent in the past two years, and gasoline prices have continued to rise. A statistical analysis of monthly, inflation-adjusted gasoline prices and U.S. domestic oil production during the past 36 years found no statistical correlation between production and pump prices, according to the Associated Press.

The much-ballyhooed increase in U.S. production simply isn’t enough to have a meaningful effect on global oil prices, which doubled from 2005 to 2011. That ultimately is the biggest factor in setting prices for retail gasoline.

U.S. production gains look impressive, but much of it offsets declines earlier in the decade because of major hurricanes that disrupted offshore and Gulf Coast facilities. Domestic production was 7.5 million barrels a day in 2010, according to the Energy Information Administration, and that number probably increased to about 7.7 million barrels last year, estimates Jeffrey Brown, an independent petroleum geologist in Fort Worth who writes frequently on oil issues.

In 2004, before the spate of hurricanes, production was 7.2 million barrels. That means domestic production hasn’t increased more than about 500,000 barrels a day despite the fracking binge and other efforts to encourage drilling. During the same period, net exports for all countries in North America — including Canada, Mexico and Venezuela, some of our biggest suppliers — fell by 1.4 million barrels, or 23 percent, according to Brown’s analysis.

Brown compares the situation to water flowing into the Titanic after it hit the iceberg.

“Let’s assume that water is pouring into the ship 10 times faster than than water is being pumped out,” he said. “The water being pumped out is analogous to the slow increase in U.S. crude oil production. The water flowing in is analogous to declining annual net exports. Guess which metric most people seem to be focused on?”

more at link above, including a nice chart on US oil product, 1949 to 2010.

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