Environmental Engineering Reference
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Who Say Drilling Won't Lower Gas Prices.”
36
(I made their list, though
as you'll see in a moment, I don't quite agree.) h ey emphasize the fact
that, as the Congressional Budget Oi ce has noted, “greater production
of oil in the United States would probably not protect U.S. consumers
from sudden worldwide increases in oil prices,” suggesting the economy
as a whole could not be insulated either. And they sharply question
the security benei ts of greater domestic production: according to the
Energy Security Leadership Council, a bipartisan group of prominent
business executives and retired military and government leaders from
across the political spectrum, “as long as the United States remains a
large consumer of oil, no level of domestic fuel production can mean-
ingfully improve energy security.”
37
O
pen any Economics 101 textbook and you'll learn what deter-
mines oil prices: it's the collision of supply and demand. High
prices make production more attractive and encourage people to
cut back how much they use. If prices get too high, supply outstrips
demand, and an oil glut develops; eventually, prices crash. Too low
a price will do the opposite, dissuading production while encour-
aging people to use more oil, which leads to a shortage of crude.
Markets eventually settle on prices that avoid both unsustainable
outcomes.
h is helps in quickly set ling one of the bat les between oil enthusiasts
and skeptics: since oil is traded globally, prices depend on how much is
produced in the entire world, not how much is pumped from the ground
in the United States. A world where the United States produces ten mil-
lion barrels of oil every day won't necessarily have lower oil prices than
one where it produces i ve million. At er all, U.S. oil production was
higher in 2010 than in 2009, but oil prices were higher too.
Score one for the skeptics. But there's less to this victory than meets
the eye. If the United States increases its oil production, and output
from the rest of the world remains unchanged, total world supply will
rise. h is means that, everything else being equal, prices will fall below
what they otherwise would have been. (If they don't, people will use
the same amount of oil they did before, and all the new oil will have
nowhere to go.) h
e big question is how much.
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