Since the price of gasoline has come down, the chant of “Drill, baby, drill” has come off the front pages. As soon as the price goes up again the drilling crowd will take it up once more. However loud the chant becomes it does not necessarily mean lower gasoline prices. Let’s take a look at reality and facts, with another fuel, natural gas.
The process known as fracking, currently being done in a number of states, has resulted in more crude oil and natural gas being produced than ever before. So much so that the price of natural gas has gone from $4.38 for 1 million BTUs last year to $2.64 for 1 million BTUs this year. The price is so low that the big gas companies are saying they are not making enough profit and want to export natural gas to Japan. Why Japan? Because the price there currently is $17 for 1 million BTUs. U.S. energy experts predict that if the gas companies get their way and export to Japan, gas prices in the U.S. will rise by double digit percentages. So by exporting our cheap natural gas, the big gas companies can make five times more profit. Talk about free enterprise.
So you think that can’t happen to the crude oil that U.S. fracking produces? Think again, because it’s already happening. U.S. law prohibits the export of crude oil. But no such export prohibition exists for refined petroleum products, and that is precisely what the big oil companies are doing. In fact for 2012 the largest single exported item measured in dollars from the U.S. is refined petroleum products (gasoline, diesel, jet fuel). The U.S. exports to other countries more fuel than airplanes, or cars, or lumber products, or anything else. In 2011 the U.S. exported 117 million gallons of refined petroleum products … per day. To restate, our cheaper crude oil is being refined into products that could be used here, and keep prices lower, but instead is sent overseas so the big oil companies can make more profit. During Newt Gingrich’s presidential run he said that if the U.S. opened up all of the oil fields to drilling, gasoline in the U.S. would be $2.50 a gallon. That will never happen because big oil companies would never let it happen.
So your solution for this mess is to just ask Congress to ban fuel exports. Given the ideology stalemate between Democrats and Republicans they wouldn’t be able to compromise legislation to tie each others’ shoes, never mind serious energy policy. Additionally the Republicans have painted themselves into a corner. During this current election cycle the Republican mantra has been to keep government regulation out of the way of business. So how could they now enact a law that would restrict big oil profits? They couldn’t do it and they wouldn’t do it, without getting egg all over their faces.
The next time you hear “Drill, baby, drill”, think about who it will benefit. The U.S. citizen seems to be way down on the list.
The writer lives in Georgetown.