The 2008 presidential election slogan, “drill, baby, drill!,’’ still resonates with many people in our country due to their frustration with the seemingly never-ending fluctuation of gasoline prices. While that frustration is very real, the perceived notion that an increase in domestic crude oil production will lessen everyone’s pain at the pumps is misleading at best and propaganda at its worst.
Simply put, drilling more oil wells will not change how deeply gas pumps will drain Americans’ wallets. There is no statistical correlation between how much oil the United States produces, and the price for a gallon of gas, according to the Associated Press. For example, oil production in our country has returned to levels last experienced in 2003 when gasoline was about $2.10 a gallon. That is certainly not what we, as consumers, are paying today for that same gallon of gas. The reason for the disparity is that oil is a precious commodity that is bought and sold on the global market. Even though our nation continues to reduce its demand while also increasing its production, the appetite for gasoline in developing countries and markets around the world continues to increase unabated. As a result, the American consumer has become a prisoner to global demand.
To avoid this dilemma, we must reduce our dependence on oil – both foreign and domestic. Our country will consume large amounts of fossil fuels in the upcoming decades, regardless of any policies put into place. The United States spends more than $1 billion per day on foreign oil. That is money we should be investing in our country.
Our country is positioning itself to be the world’s largest producer of crude in the coming years as it increases drilling and exploration. While it will have little effect on the price of gasoline, surpassing Saudi Arabia will surely create needed jobs and will further reduce our dependence on foreign oil. In order to accomplish those goals, the oil industry must overcome many roadblocks such as those experienced by the Keystone Pipeline. Recently, President Obama proposed lifting the ban on offshore drilling along the Atlantic Seaboard, in the Gulf of Mexico, and along the Alaskan coast. If done responsibly, environmental concerns can be safely addressed while sending a strong positive supply signal to foreign oil markets.
Globally, offshore drilling is going to take place regardless of whether our government allows it here or not. It will not be easy, however, to transition away from the dependence on foreign oil. We must reduce the demand for foreign oil by both increasing domestic oil well production and developing more alternative energy sources.
Alternatives are important, but they cannot substitute for the large amount of oil and gasoline that we now consume. As an example, Japan is one of the world’s leaders in developing alternative energy sources. Its main alternative energy sources include nuclear power, hydroelectricity, photovoltaic electricity, geothermal energy, and possibly tidal and wave power. Despite these efforts in alternative energy development, Japan’s domestic oil consumption has increased from 20 percent of the total energy consumed in the 1950’s to more than 50 percent today. The destruction of Japan’s nuclear power plants by earthquakes and a tsunami in 2011 illustrates the heightened concerns about the safety and reliability of nuclear power and the need to address alternative energy sources.
The demand for oil is projected to increase and we must be up to the challenge to reduce the burden on future generations. One way to accomplish this would be to take advantage of the abundance of natural gas that is available in the Marcellus, Utica, Haynesville and Niobrara shale areas, and other emerging sources. It is paramount that our nation develops alternative energy sources, as well as safe and reliable technologies to harvest and utilize natural gas in order to reduce our dependence on crude oil.
Zhen Ma, Ph.D. is an assistant professor of business and Thomas Sweetz, M.S. is an adjunct faculty member of the Department of Business at Misericordia University.