Why U.S. Oil Conservation Won’t Really Lower Prices

Like a broken record the Obama Administration is nearly daily marketing some myth that increased U.S. oil conservation will somehow lower oil prices. And simply a myth is what this is. The truth is that for it’s 300+ million person population, the U.S. actually uses far less oil per capita than many smaller nations such as Saudi Arabia, with only around 30 million persons, which domestically uses around 3.2 million barrels a day of oil, which is a little bit less than half of it’s average of 8.8 million barrel a day production. Gas also costs only around 45cents in this nation, and electricity prices are very low as well. By contrast, Americans are paying very high gas prices and electricity prices both. In fact, domestic oil consumption is very high per capita in every major world oil producer including Canada, Russia and Brazil. In many cases this high domestic production only encourages these nations to use more domestic oil, often burning oil to create electricity when other options such as nuclear power would preserve domestic oil reserves. But, worldwide some oil producers such as Venezuela also offer gas as low as .19 a gallon to help to buy political support among the people.

Many Americas are now opting for bicycles as an alternate form of transportation, and certainly millions of these bicycles have reduced U.S. oil demand somewhat as have the more fuel efficient fleet of U.S. automobiles sold each year. However, this steady drive toward U.S. oil conservation has done little to nothing to reduce U.S. oil prices very much at all. We wouldn’t be facing $4 a gallon gas right now if this sort of conservation really worked would we.? So why should we believe the claims of the Obama Administration that reducing oil consumption now would really bring prices down. Conservation hasn’t worked before, and it won’t work now. All conservation does is make oil prices cheaper for the individual consumer, not cheaper overall. This argument by the Obama Administration is all smoke and mirrors.

The U.S. also is powerless to curb the rising oil demand of growing economic global powers such as China and India, as the growth in the number of automobiles and factories grows in both nations each year and at some point in the future both nations, especially China will far surpass the U.S. in the amount of oil required per capita per day. Any U.S. efforts to conserve oil will do little if the U.S. continues to buy huge amounts of plastic goods or other consumer goods from Chinese factories each day. Right now, China’s factories in 500 of their largest cities are producing so fast, that the air pollution quality is so bad for children in those cities, that it’s like a baby smoking a whole pack of cigarettes a day. A reduced U.S. demand for oil will do little good when U.S. consumer demand for Chinese produced consumer goods pushes production that increases their oil consumption or their domestic pollution levels. Further, would a cutback in U.S. demand for Chinese made goods really be a good thing? Chinese citizens overall are better off than ever because of this new wealth due to world demand for their products, and it has further allowed the Communist government to become more moderate in many areas. The same thing holds true for Vietnam. More trade with the U.S. has made Vietnamese better off than ever as well as moderated their Communist government somewhat. Trade has taken two former military rivals of the U.S., and made them friends of the U.S. That’s both remarkable and good. And, even North Korea seems to want to take some baby steps toward attracting more investment in the nation. The official North Korean government Website now touts the fact that North Korea has the lowest taxes in in all of Asia as well as a willing and able workforce ready to manufacture goods for world consumption.

While the Obama Administration wrongly claims that oil conservation will reduce oil prices, the Republican presidential opponents also promote some myth that increased oil drilling will somehow lower prices. This also appears to be very wrong as well because U.S. oil producers are deliberately not producing as much oil these days as they were in the peak oil production year, 1985. In 1985, U.S. producers produced 8,791.00 million barrels compared to only 5,511.93 million barrels in 2010. Several factors are at play here. Gas was only an average of $1.20 a gallon back then compared to close to $4 a gallon today. Where is there any incentive to major U.S. oil producers to put more oil on the market which only reduce their price per gallon? Why work harder or spend more money to produce less income per gallon. Further, in many cases importing oil seems cheaper than the costs involved either exploring for more oil or attempting to raise oil levels with wells that have become largely depleted. Saudi Arabia can use million of gallons of sea water to raise low oil levels of partially depleted wells each day, but here in the U.S. such a process would only create giant oil slicks at sea unless the source water is in an enclosed area. And injection of gas to raise recoverable oil levels like they do in Russia isn’t always cost effective either. The bottom line is that increased oil drilling isn’t really something that U.S. oil producers have as much incentive to do compared to importing or opting for cheaper projects like drawing oil from Canadian oil sands by pipeline, which is something that the Obama Administration put on the back burner for 2012. And, unfortunately neither the Obama Administration nor his Republican opponents are offering up serious proposals to reduce oil prices. Neither the conservation argument or the more drilling argument are realistic approaches to a problem where there is little incentive for oil producers to pump more oil when they can charge more for less product, or many oil wells have become depleted with time, or oil speculators on the commodity market like to make money by seeing oil prices rise, or nations like Iran cause international mischief by threatening to cutoff oil shipping through the Strait Of Hormuz.

Unfortunately a presidential election year is one of the worst years to have a serious issue discussion. This is especially so when we have to endure this nonsense oil debate between the Obama Administration or the Republican opponents who want his job, who have both oversimplified their arguments down to the point of both offering wrong answers to a serious question that is hurting American consumers and the economy both.

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