The price of a gallon of gasoline is approaching record-high levels in the U.S. Some politicians and businessmen argue that the U.S. needs to increase its production of oil to counter this trend, by increasing offshore drilling or extracting tar sands, or by other means.
Recently Senator Jeff Bingaman (D-NM), chairman of the Senate Energy Committee addressed this question:
“Let me state this as clearly as I can – what I believe is really without dispute among experts. That is, we do not face cycles of high gasoline prices in the United States because of a lack of domestic production. We do not face these cycles of high gasoline prices because of lack of access to federal resources, or because of some environmental regulation that is getting in the way of us obtaining cheap gasoline.
“As was made clear in a hearing we had in the Senate Energy Committee in January, the prices that we are paying for oil and the products refined from oil, such as gasoline, are set on the world market. They are relatively insensitive to what happens here in the United States with regards to production. Instead, the world price of oil and our gasoline prices are affected more by events beyond our control, such as instability in Libya last year or instability in Iran and concerns about oil supply in Iran this year.
The top chart shows that price variations over the past fifteen years are similar in all these countries (though lower in the U.S. because of lower taxes). His next chart shows that the price of gas in the U.S. is independent of U.S. oil production:
“While domestic oil production plays an important role in the energy security and economy of our country, its contribution to the world oil balance is not sufficient to bring global oil prices down. And, for this reason, increased domestic production unfortunately will not bring down gasoline prices in our country.”