A vocal and determined faction of Congressional members is actively working to convince U.S. consumers that lifting bans on domestic oil drilling of protected lands will bring gas prices back down to earth. In fact, a new analysis by the Consumer Federation of America (CFA), the leading voice for consumers, finds that more domestic drilling will do little, if anything, to ease the financial burden record high gas prices are placing on the shoulders of struggling U.S. consumers. The analysis finds that domestic drilling in sensitive areas would fail to produce enough oil to significantly impact the world price of oil, the price that determines what consumers pay for gasoline at the pump.
So why are so many on Capitol Hill chomping at the bit to drill protected lands? The analysis finds that oil companies, already flush with record profits, would improve their bottom line even more by drilling protected domestic land. More domestic drilling means more product for oil companies to sell at the high world market price, with fewer costs to produce it. The consumer doesn't see a cent, while oil companies rake in even more cash.
Findings of the CFA analysis include:
• The U.S. Department of Energy has analyzed the amount of resources that might be found in off limits areas and concluded that there is not enough there to significantly change the world price and any negligible effect on the price of oil would take years to develop.
• Oil companies make more money on oil and natural gas extracted in the U.S. because the royalties, production and transportation costs are lower. These oil companies make fifty percent more on domestic oil and pocket the difference. They do not pass it through to consumers.
• In the first half of 2008, the price of oil was just over $100 per barrel, about $45 per barrel more than the comparable period of 2007. The cost of finding crude oil did not increase anywhere near that much, so oil companies pocketed record profits.
• In the first six months of 2008, the cash flow of the five top U.S. oil companies grew 17 percent to about $100 billion, but less than half of that was invested in exploration and capital expenditures.
Consumer Federation of America's Analysis is here (PDF).