Increase in U.S. Oil Production Won't Lower Gas Prices

The United States is expected to become the world's largest oil producer, but demand in developing countries will keep our gas prices from falling.

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Gas station attendant Dan Bajada helps pump gas for a customer at Menlo-Atherton Shell gas station in Menlo Park, Calif., Wednesday, Sept. 19, 2007. Oil prices retreated after hitting a record high Tuesday when the government reported surprisingly large declines in oil inventories and an unexpected increase in gasoline supplies. At the pump, gas prices rose 0.3 cent overnight to a national average of $2.79 a gallon, according to AAA and the Oil Price Information Service.

Gregg Laskoski is a senior petroleum analyst for GasBuddy.com

If the United States should indeed surpass Saudi Arabia as the world's largest oil producer, as the Associated Press reports, shouldn't that mean lower gasoline prices for Americans? Don't be too quick to make that bet—palatial casinos are built on such odds.

AP reports that the United States is on track for a 7 percent increase in oil production this year to an average of 10.9 million barrels per day. And the U.S. Department of Energy is forecasting that U.S. production of crude and other liquid hydrocarbons will average 11.4 million barrels per day in 2013. AP says that would be a new record and would fall just below Saudi Arabia's output of 11.6 million barrels per day.

[See a collection of political cartoons on gas prices.]

More bullish forecasts come from Citibank, whose analysts say U.S. oil production could reach 13 to 15 million barrels per day by 2020. But—here comes the rain on the parade—the United States is still expected to continue to import plenty of oil in the years ahead because we're consuming 18.7 million barrels per day. 

Regrettably, AP reminds us that the increase in production hasn't translated into cheaper gasoline and it's not likely to, either. They say U.S. gas prices are expected to remain relatively high because of growing demand for oil in China, India, and other developing nations. We've already been down this road and obviously it's frustrating to learn that we might produce more oil than Saudi Arabia and we still can't catch a break.

It's critical to remember that U.S. oil production is inherently tied to global oil production and the delicate balance that is created by the see-saw of peaks in increased oil production driven by higher global crude oil prices, and valleys that slow down production when crude prices fall too low.   

[See a collection of political cartoons on energy policy.]

Ultimately, gains in U.S. oil production can and will be beneficial to the U.S. economy if achievable gains reduce imports from the Middle East and also soften global crude oil swings in the process. The vision of U.S. autonomy and energy independence, which has been the rhetoric and wishful thinking of every American  president since Harry Truman, is now a foreseeable reality.  

Hopefully, the U.S. Department of Energy and other government offices will support the new era of production, reduce obstacles, and encourage greater transparency so that refineries might refrain from artificially manipulating gasoline production, supply, and prices.

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