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| Even twenty years down the road, when Arctic Refuge oil is at or near peak production, gas prices would be affected by about a penny per gallon. |
Drilling Nets About a Penny per Gallon, 20 Years From Now
Proponents of drilling Arctic National Wildlife Refuge point to rising gasoline prices as a reason to drill one of America's last wild places. But in reality, Arctic Refuge oil would amount to a drop in the bucket of the oil market. The U.S. Department of Energy's own Energy Information Administration (EIA) estimates that even twenty years down the road, when Arctic Refuge oil is at or near peak production, gas prices would be affected by about a penny per gallon.
U.S. Dept. of Energy, Energy Information Administration, July 2005, "Impacts of Modeled Provisions of HR 6 EH: The Energy Policy Act of 2005." EIA estimates reduction of $0.57 per barrel of oil. Assuming a one-to-one impact on gasoline prices, $0.57/42 = $0.014 per gallon. In Table C12 of that report EIA predicts impacts of even less ($0.008/gallon) on motor gasoline from HR 6. (The latter estimate apparently includes the impact of ethanol blending.)
A Drop in the Bucket
A July 2005 report from EIA, which optimistically used USGS estimates of technically recoverable oil, found:
- If oil were discovered in commercial quantities, it would take 10 years before a drop of Arctic Refuge oil could first be produced. In 2015, it would only make up 0.06% of world oil production.
- Even at or near peak production (in 2025), Arctic Refuge oil would make up only 8/10 of 1 percent (0.8%) of world oil production and only 3% of U.S. oil consumption.
Oil Prices are Set on the World Market
"Even if all the oil we consumed in this country came from Texas and Alaska, every drop of it, assume we didn't import any oil from the Persian Gulf, prices would still be just as high today. And the main reason is that domestic prices will rise to the world price."
-Jerry Taylor, Cato Institute, interview with National Public Radio October 5, 2000
Finding all the oil we need here at home "was a failed notion under Richard Nixon, and it's certainly a failed notion today....We're a declining oil province and have been for 25 years."
ExxonMobil CEO Lee Raymond
Oil prices are set on a global oil market, and Arctic Refuge oil production would amount to a drop in the bucket. Historically, such small increases in U.S. production have had little or no impact on world oil prices.
OPEC nations control over 75 percent of the world's oil reserves and produce 42 percent of the oil currently consumed throughout the world. OPEC meets several times a year to agree on production levels. This collusion of oil powers sets the worldwide price for all oil, based on simple supply and demand principles. They have the majority of the supply and we have the majority of demand. Thus the U.S., because of its minimal oil reserves and small contribution to the world market, cannot affect the world price of oil through domestic production alone.
Even if drilling our way to energy independence were the answer, Americans who are concerned about reducing their prices at the gas pump would have a long wait if they're looking to Arctic oil. The oil and gas industry itself estimates that oil from the Arctic Refuge would not be available for at least seven to ten years, due to the complicated nature of leasing, exploration and infrastructure construction.
Record Profits for Oil Companies
As Americans struggle with record high gas prices, oil companies like ExxonMobil are enjoying record high profits. Exxon is the most profitable company in the world, and just last quarter posted profits of $7.84 billion.
GAS PRICES:
$2.80 - Average retail price for regular gasoline, up 88 cents over the last year.
$2,873 - Amount average family of four will spend on gasoline this year
RECORD PROFITS:
$25.3 billion - Exxon Mobil's record-setting profits in 2004.
$3.4 billion - Fourth-quarter 2004 profit for Chevron-Texaco Corp, double the profit for the same quarter of the previous year.
218% - Exxon Mobil profit increase in 2004.
145% - ConocoPhillips profit increase in 2004.
51% - Shell profit increase in 2004.
39% - ChevronTexaco profit increase in 2004.
35% - BP profit increase in 2004.
22.8 cents - Amount of money U.S. oil refiners made in 1999 for every gallon of gasoline.
40.8 cents - Amount refiners made in 2004 - an 80 percent jump.
99 cents - Amount refiners were making during September 2005 price spikes.
$228 billion - Combined profits for the five biggest refiners from 2001-2005.
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