Why would producing more oil in America reduce the price of oil in America?

I can’t see the logic behind the calls for more production in the US. Isn’t the price of oil just determined by global supply and demand?
@whiteflame55
So the US government would tell Exxon and BP and Texaco what price they have to sell their oil for in America? And that they may not export any?

23 Responses to “Why would producing more oil in America reduce the price of oil in America?”

  1. ndmagicman Says:

    It would do nothing to lower the price. The benefit would be less oil imported from other nations. As it stands now the US is the third largest oil producer in the world. A distant third. Even maximizing every drop of reserves in the US would not get us up to #2. I am surprised so many people are missing the fact that there is a oil boom going on right now in the US. Many western states are experiencing record oil and natural gas production levels. A new deepwater permit was just issued for the Gulf to add to the already 2,000 plus rigs in the Gulf.

  2. Justin Says:

    Because it doesn’t come from a saudi tanker.

  3. BULLS EYE Says:

    Because we wouldn’t "buy" it from someone else, and pay the high price of importing it.

  4. Dandy O'Dandy Says:

    am i in a cartoon?

  5. Average College Student Says:

    It wont. This is a smokescreen to increase production in the hope it will bring prices down.

  6. Matthew D Says:

    Yes. Saudi Arabia is upping production to offset the decrease in Libya’s production. Guess what? Its still going up. The isn’t about lowering the price of oil. There is a lot of money to be made in oil, and some folks feel they’re missing out. That’s it.

  7. jjt Says:

    yes but when we produce it for our own use we control the price, its common sense

  8. dougavatar Says:

    And what are your political leanings!!!

  9. Thankyoumam Says:

    Look what happened in 2007 when oil prices surged like this. Bush opened up more drilling and the price of oil fell in half in a matter of weeks.

    To understand the dynamics of the oil market, you have to understand "futures". A barrel of oil is not over $100 today, but the futures selling price is over $100. Big difference. Nobody is actually buying $100 barrels of oil.

  10. No more drilling Says:

    It would actually make the price of oil go up if we drilled more in the USA.

  11. Sadcat Says:

    If US production increases, then global supply also increases, all else being equal. Surprisingly, the US is in fact located on the globe.

    This is a question for the old "duh" file.

  12. Cessna 421 Says:

    Of course you wouldn’t see it. It doesn’t exist in your Liberal logic!. FIrst off, we could cut down on the 80 million barrels a day we IMPORT from the far east. That means LESS money we are sending to the far east! The less we import, the less cost we have to cover to produce products made from basic petroleum but Liberals can’t see it that way! DUH!!

  13. whiteflame55 Says:

    It wouldn’t, but not for that reason. You’re right, there is a global supply and demand force for oil, but when the oil is produced internally and not sold externally, it can be used to effectively bring down prices here. The problem is that it would take decades to access new sources of oil in the U.S. What’s more, even if we allowed companies to access it, many of them would probably leave it standing. These companies often control many more sources of oil than they’re actually using, the point being to keep prices up and ensure that they have a supply of oil that they can access later in times of trouble. The big problem, therefore, is that few of these will even be accessed, and even the ones that are will have a delayed reaction to the market.

    Edit: I didn’t say that. The price that oil is sold at tends to be regulated by those that control the majority of the oil: OPEC. Since this oil isn’t going through OPEC, the price would be reduced by comparison. The U.S. government doesn’t set oil prices, and companies are constrained by the price of a barrel of oil that is set by OPEC. However, the U.S. government could easily provide oil contracts to them that state that the oil can only be sold in the U.S. That would actually make them even less likely to drill there, but those kinds of contracts could very easily exist (we’re basically selling them the land anyway).

  14. Arizona Its All Good Says:

    For one thing it would give Americans jobs. Two who cares this is America. We should be able to buy our own oil. If not we need to change the laws quickly.

  15. Shovel Ready Says:

    Increasing domestic production would increase global production by an equal amount. This will put downward pressures on prices, just as obama’s moratorium put upward pressure on prices.

  16. Vito1964 Says:

    No, it’s not dictated by supply and demand. This is the biggest misconception about oil. It’s determined by commodities traders speculating on oil futures. Real oil production doesn’t fluctuate that much and neither does demand, the only thing that fluctuates is the amount that people are willing to pay when they think sometime in the future someone else will be willing to pay more.

    The real value of increasing local oil production is minimal. Unless we disallow companies based overseas from drilling on US soil (We never have, ie BP is a British Company) it doesn’t really change anything. The only way we’d see any benefit from it is if the US government buys their own rigs and sells the oil on the open market with the profits going into the National coffers.

  17. Scott H Says:

    Let’s let freedom and Capitalism make that call. Allow drilling and refining in the USA. If it is profitable, then private companies will do it. If not, they won’t. Prices will land accordingly. The free market always works if the government stays out of the way.

    Who would you rather control oil? American entrepreneurs or Arab enemies?

  18. bi-polar-itical Says:

    the logic is that if we produce more here in the USA, when the suez canal gets shut down, we are not at the mercy of those ME countries. not much chance of oil supplies being interupted coming from canada versus lybia.

  19. Demo Man Says:

    It won’t.
    http://www.grist.org/article/saudi-oil-cheaper-than-american-oil/

  20. Tom Cantine Says:

    You’re right; it wouldn’t lower the price. If it were profitable to produce oil domestically, someone would do it, and of course as the price of oil rises, eventually it will become profitable to exploit more of those domestic sources. But so long as it’s cheaper to pump it out of the ground in the Middle East, there won’t be a whole lot of domestic production, unless demand rises so high as to drive up the price.

    If we could produce domestic oil CHEAPLY, you bet it would bring down the price. But if we could do that, we’d already be doing it.

  21. FOOD FIGHT! Says:

    Oil tankers are so huge and use so little fuel and men on board that it adds nothing to the cost of a gallon of gas. Especially when you consider that the oil that is left in the U.S. is the expensive difficult to get at oil. It would increase supply and the price of oil is set by supply and demand.

    A tanker is a ship that delivers cargo that is lighter than water so the whole thing is full to the top. No stevedores are required to onload and offload. It is just pumped.

    It is a good question and I will get back to you with good numbers.

    Edit: I have it. A super tanker charter rate is 31,300 dollars per day and that is high now because of tension in the middle east. It is usually lower.

    A tanker holds 2 million barrels of crude per day and there are 44 US gallons in a barrel

    It takes 14 days to move a tanker from the middle east to the US.

    31,300/2,000,000/44*14 = .00049 cents per gallon or a little less 5 thousandths of a cent per gallon to deliver oil from the middle east.

  22. rz1971 Says:

    You have to factor in a lot of variables that most ignore. First, is transporting that oil from halfway across the globe, usually by large tankers. Next think about where the money paying for that oil is going, you got it, those same Middle East countries. Now imagine instead that oil going into American workers’ pockets, who got jobs for drilling in here in the USA. That money goes into our economy, instead of some foreign economy. Doesn’t that make sense to you?

  23. Rick Says:

    A lot of folks can’t understand how we came to have an oil shortage here in our country.
    Well, there’s a very simple answer. Nobody bothered to check the oil.
    We just didn’t know we were getting low. The reason for that is purely geographical.
    Our OIL is located in:
    ~~~
    ALASKA
    ~~~
    California
    ~~~
    Coastal Florida
    ~~~
    Coastal Louisiana
    ~~~
    North Dakota
    ~~~
    Wyoming
    ~~~
    Colorado
    ~~~
    Kansas
    ~~~
    Oklahoma
    ~~~
    Pennsylvania
    And
    Texas
    ~~~
    Our dipsticks are located in DC