Will more oil drilling reduce gas prices?

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   movingoutposted 11 years ago

   I came across this today and its conflicting to what most people would think. What do you think?
   https://sphotos-b.xx.fbcdn.net/hphotos- … 1023_n.jpg

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      HowardBThinameposted 11 years agoin reply to this

      The photo's wrong. The president can have a huge effect on gas prices at the pump through energy policies. Oil trades on the futures, so that's always a consideration, but it's still supply/demand based so obtaining more oil here is going to drop prices on crude.

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   Mighty Momposted 11 years ago

   Agree with the headline.
   The President doesn't control gas prices any more than he controls food prices or clothing prices. Contrary to some people's claims to the contrary, he does not now, nor does he wish to take control of all private business in the US and have the government run it.
   Of COURSE the oil companies control prices.
   RIght now, California gas is between $4 and $5 a gallon. Why are we paying so much?
   Supposedly there was a "refinery fire." Guess what? There is a "refinery fire" every year!
   
   Oil prices are highly volatile and change literally minute to minute. Having worked with regional oil distributors, I can say that not even they can control prices. They just have to react.
   
   Now, as to the bottom part of the info graphic.
   Global demand in increases but American oil supply does not.
   What happens to the price?
   Global demand increases and American supply also increases.
   What happens to the price?
   
   That's waaayyy too complex for little old me to figure out.
   Maybe one of our resident free market economists will explain it for us.
   

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   JaxsonRaineposted 11 years ago

   I'm no expert, but...
   
   1 - OPEC... they do not operate on free market principles, they fix prices for the most profit. We got close to suing them once, but the legislation that would have allowed it didn't pass by a narrow margin, iirc.
   
   2 - Regulations... often it is easier for companies that drill to simply sell their crude to a company in another country, than to deal with all the regulations that have to do with transportation, storage, refining, and distribution.
   
   3 - Costs of selling domestically vs. abroad. There are substantial costs in transporting oil. There is a reason why, in 2008, gas was $1.19 or so in Houston, and over $3.00 in central Utah.
   
   4 - Speculators... speculators do drive prices to higher highs and lower lows than would happen otherwise. As long as the US has an unfriendly oil environment, and OPEC is fixing prices, speculators are going to put pressure on keeping the price high. If our government suddenly made it much easier to drill/refine oil, speculators would drive the price of oil down substantially.
   
   5 - The dollar... foreign currency is a very, very, very tricky topic. When you get good news about the US economy, you would expect the dollar to become stronger. Well, sometimes yes, sometimes no. When the dollar weakens, as it is considered the safe haven currency, people tend to flock to A: other 'safe' currencies, B: commodities(gold, silver, oil).
   
   Now, if the world economy is doing well, and the US economy is doing well, then you get what is called risk appetite. People use the USD the same way investors use government bonds. Safe. For risk, they tend to invest more in emerging markets... riskier currencies.
   
   In our situation, with worldwide crisis after crisis, we have risk aversion. This is why gold and oil are so high... the dollar isn't really looked at as safe, but other currencies aren't either. If the US economy were to improve, and the world economy remained uncertain, people would start flocking to the dollar, and commodity prices would plummet.
   
   Now, this point is directly tied to domestic production. The more oil WE produce, even if we sell it abroad, the more MONEY and WEALTH we bring into our nation. The more jobs we have. The better our currency does. It would strengthen the dollar, and draw investors away from commodities, into our markets.
   
   So, directly as an increase of supply, I don't think it would make an appreciable difference. Indirectly though? We could see $1.50 gas again.

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   movingoutposted 11 years ago

   @HowardBThiname, then Fox News, O'reilly has it wrong? He stated when under President Bush gas prices were high, that "no President" can affect the price of gas at the pumps.

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      JaxsonRaineposted 11 years agoin reply to this

      Yeah, he was wrong.
      
      To be fair, it's up to the President and Congress working together... if Congress won't pass anything there isn't as much the President can do.

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      JaxsonRaineposted 11 years agoin reply to this

      Were you at all interested in my reply?

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         movingoutposted 11 years agoin reply to this

         Look back my response was @HowardBThiname.

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            JaxsonRaineposted 11 years agoin reply to this

            I know. I was asking if you were interested in my original reply.

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               movingoutposted 11 years agoin reply to this

               Sorry, I concur with much of what you said. And most would agree to drill even more. Problem is, the ones saying drill more, don't want it in their backyards. In my state, Florida, most say drill more. But when asked if they want it on their skyline, they say no way. Or, we don't want the unexpected cleanups like in the Gulf.

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                  JaxsonRaineposted 11 years agoin reply to this

                  Yeah... nobody wants oil refineries or windmills on their horizon... people complain at issues from both sides.
                  
                  I just saw that Venezuela has gasoline at like $0.09/gallon... I really see no reason why we have to be any higher than $1.50.

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      HowardBThinameposted 11 years agoin reply to this

      Yes, movingout - he was wrong.

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5. 59

   movingoutposted 11 years ago

   I agree, when these oil companies are making record profits, there is no reason to high prices. Other then greed! Follow the money...

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      JaxsonRaineposted 11 years agoin reply to this

      The oil companies are only a part of the problem. Probably about $0.30/gallon right now goes to their profits.

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6. 83

   kathleenkatposted 11 years ago

   Yes, more drilling would drive down prices.
   
   Demand drives up prices.
   
   When supply goes up, demand goes down; When demand is up, supply is down.

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   SoManyPathsposted 11 years ago

   Not In California. Politicians will come up with some wacky statement that the "fall blend of gas" is more costly vs summer and winter blend.  Like Southern California really has multiple seasons. It can hit 90 degrees in any month (and has)

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