Gas Prices: Myths vs. Facts
Myth: We have enough domestic supply to drill our way to energy independence
Myth: Increasing the number of oil permits will decrease the price of oil
- Fact: According to a report by the House Natural Resources Committee: Between 1999 and 2007, the number of drilling permits on public lands has increased by more than 361 percent, yet gasoline prices continued to skyrocket. Increased leases have not reduced the price of gas.
Myth: Congress has blocked efforts to expand refinery capacity.
- Fact: Refining capacity has been expanding since 2001 and this expansion has increased oil production by a million barrels per day.
- Fact: Oil companies have only applied to build one refinery in the last four years and a new refinery has not been built in the United States since 1976.
- Fact: Congress passed legislation in 2005 to streamline refinery permitting that refiners have never used. The 2005 Energy Bill authorized the Administrator of the Environmental Protection Agency to enter into refinery permitting cooperative agreements with states. However the EPA testified that no state on behalf of any refiner has ever used these provisions.
- Fact: Our refineries are already so stretched that last year, the United States had to import almost 150 million barrels of gasoline. The Wall Street Journal reported oil companies are not building new refineries because it would be bad for their bottom line. “Building a new refinery from scratch, Exxon believes, would be bad for long-term business.”
Myth: Increased demand has led to the increase in oil prices.
- Fact: Among a number of issues, including instability in the Middle East, increased demand from China and India, the weakening of the dollar in the global market, and the lasting impact of Hurricane Katrina on the oil energy market; speculation has had a devastating effect on oil prices. The large purchases of crude oil future contracts by speculators have artificially inflated the demand for and therefore the price of oil. We are putting a price on oil that has yet to be pumped out of the ground. According to a top official at the EIA, speculation has inflated prices by at least 10 percent and based upon the above factors energy should be at $90 a barrel, not $143.
Myth: Drilling in the Arctic National Wilderness Refuse (ANWR) will reduce the price of oil domestically.
- Fact: If we started drilling in ANWR today we would not see an additional drop of oil for about a decade. The peak estimated oil production in ANWR is 780 thousand barrels a day. If consumption continues at current levels of 20.7 million barrels per day ANWR would provide less than 4 percent of daily consumption. Additional oil production resulting from the opening of ANWR would be only a small portion of total world oil production, and would likely be offset in part by somewhat lower production outside the United States. Production in ANWR would lower gas prices by 1.8 cents per gallon in 2030.
- Fact: The amount of oil and gas that could be produced from already leased but unused oil reserves is over 10 times what is available in ANWR.
Myth: The federal government has not opened up enough land for drilling for oil and gas
- Fact: 81 percent of estimated oil and gas resources on both federal lands and the Outer Continental Shelf are available for oil and gas drilling or will be accessible pending the completion of land use planning and environmental reserves.
- Fact: The amount of oil available in these reserves is equal to 107 billion barrels of oil and 658 trillion cubic feet of natural gas.
- Fact: There are 68 million acres onshore and offshore in the U.S. that are leased by oil companies—open to drilling and actually under lease—but not developed.
- Fact: If oil companies tapped the 68 million federal acres of leased land it might generate an estimated 4.8 million barrels of oil a day – six times what ANWR would produce at its peak.
Myth: Opening up the Outer Continental Shelf (OCS) would lead to decreased prices.
- Fact: According the Energy Information Administration, it would take five years for oil production to begin at any new site on the OCS. EIA predicted that there would be no significant effect on oil production or price until nearly two decades after leasing begins.
- Fact: Oil companies do not need new leases along the OCS. According to the US Minerals Management Service only 20 percent of the 38.5 million acres of existing leases along the OCS are being used for production. The vast majority of oil and gas deposits along the OCS are already open to drilling, 82% of the gas in the OCS and 79% of the oil in the OCS is available for leasing.
- Fact: The average oil field size in the OCS is smaller than the average in the Gulf of Mexico, which is already being developed As a result, much of the oil in the OCS would be expensive to extract, and is only becoming attractive now as a result of high oil prices.
- Fact: Offshore drilling in sensitive areas would increase domestic oil production by 7 percent by 2030, according to the EIA. But “because oil prices are determined on the international market…any impact on average wellhead prices is expected to be insignificant.”
- Fact: Due to the high price of oil, existing drilling ships are “booked solid for the next five years,” and demand for deepwater rigs has driven up the price of such ships. Oil companies just do not have the resources to explore oil fields in the OCS.
- Fact: Oil companies find it financially advantageous to keep the leased land on their books even if they are not producing or exploring.