More US Oil Drilling: A Boom for Big Oil, A Bust for Consumers

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).

Comments

[Sundialsvc4]

Please remember that the Constitution of the United States has been "put off the table." There is nothing at all that you can do about this "because we said so."

What's that I hear? "Forbid it, almighty who?" "Give me liberty or ... oh come now, such an extreme position..."

[GRUMP54]

Finally a member of the media (chris Matthews) asked a Republican guest what would happen if we did open all these domestic areas for more drilling..­.....would­n't the oil go to the high bidder (China perhaps) in our open market world? ....and if so..how does our infusion of petroleum to the world market able to truly impact our energy prices?....wouldn't it be just a drop in the proverbial bucket....THIS QUESTION SHOULD BE ASKED OF EVERYONE WHO SAYS "DRILL DRILL DRILL"...

[ElectionAddict]

I need help understanding this. What is the answer? Did ChrisM get an answer? Would American oil go onto the open market because of big oil greed to get the highest price, or is there some agreement with the world market by our government that this occur, that everyone can bid for it?

[stresstool]

I am not certain who or where to ask, but I have what I believe is a simple question.

Since the oil companies seem to be drilling in only a very tiny fraction of the land on which they are free to do so, what makes any of us (especially the politicians) believe that providing even more area, will the oil companies suddenly choose to drill there?

A related question might be, are any oil companies presently involved in the efforts to lift the ban on drilling in protected areas? If so, who?

[kat721]

How depressing that once again Congress's solution to a problem is going to make things worse for all consumers and better for none.

[DrLawAndJustice]

You are dead on Mr. Cooper. What we need is an energy policy that will get us off oil for good. Allowing domestic drilling for oil is like allowing heroin addicts to grow poppies in their own back yard. At least its better than importing it from terrorists in Afghanistan, right?

[KZwally]

Well said. Thanks for getting the word out here.

[BlueMrsKitty]

Thank you for shedding light on the misguided notion that domestic drilling will bring about relief for consumers. Clearly, this is just another ploy to line the pockets of big oil.