Drilling Down

With rising gasoline prices front and center in presidential candidates’ stump speeches, Associated Press decided to look at the numbers. AP analyzed 36 years of monthly, inflation-adjusted gasoline prices and U.S. domestic oil production and found no statistical correlation between U.S. oil production and what consumers pay at the pump. “More oil production in the United States does not mean consistently lower prices at the pump,” concludes the analysis, based on Energy Department figures for regular unleaded gas prices adjusted for inflation to 2012 dollars. “Sometimes prices increase as American drilling ramps up. That's what has happened in the past three years. Since February 2009, U.S. oil production has increased 15 percent when seasonally adjusted. Prices in those three years went from $2.07 per gallon to $3.58. It was a case of drilling more and paying much more.”

That’s because oil is a global commodity and U.S. production has only a small influence on supply. “Unlike natural gas or electricity, the United States alone does not have the power to change the supply-and-demand equation in the world oil market, said Christopher Knittel, a professor of energy economics at MIT. American oil production is about 11 percent of the world's output, so even if the U.S. were to increase its oil production by 50 percent - that is more than drilling in the Arctic, increased public-lands and offshore drilling, and the Canadian pipeline would provide - it would at most cut gas prices by 10 percent."

U.S. crude oil production, currently about 5.6 million barrels a day, is at its highest level since 2003. Citi analysts expect U.S. oil and gas production to pass Saudi Arabia and Russia by the end of 2013.

--Reed McManus / photo by iStockphoto/FauxCaster