Sunday, April 1, 2012

Drilling And The Cost Of Gas

From USA Today, -the mainstream no less! - this article discussing, though not too in depth, the lack of correlation between drilling and the cost of gas. As war looms with Iran gas prices are rising, as they tend to slightly every summer. Drilling proponents argue drilling is the way to keep prices low, but peak Oil is cropping up everywhere and prices go up anyway.

Analyzing 36 years of gasoline prices and U.S. oil production, the Associated Press finds no statistical correlation between how much is pumped out of the ground and how much is paid at the pump.

AP says four independent statisticians came to the same conclusion.

As it was four years ago, the price of gasoline is an issue in the presidential campaign. This year, it's Republican candidates -- notably Newt Gingrich -- claiming that more domestic oil production would lower pump prices. AP writes, "If more domestic oil drilling worked as politicians say, you'd now be paying about $2 a gallon for gasoline. Instead, you're paying the highest prices ever for March."

When you put the inflation-adjusted price of gas on the same chart as U.S. oil production since 1976, the numbers sometimes go in the same direction, sometimes in opposite directions. If drilling for more oil meant lower prices, the lines on the chart would consistently go in opposite directions. A basic statistical measure of correlation found no link between the two, and outside statistical experts confirmed those calculations.

As one energy economist put it: "Drill, baby, drill has nothing to do with it."

Political rhetoric about the blame over gas prices and the power to change them — whether Republican claims now or Democrats' charges four years ago — is not supported by cold, hard figures. That's especially true about oil drilling in the USA. More oil production in the USA does not mean consistently lower prices at the pump.

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% 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.

U.S. oil production is back to the same level it was in March 2003, when gas cost $2.10 per gallon when adjusted for inflation. That's not what prices are now.

That's because oil is a global commodity, and U.S. production has only a tiny influence on supply. Factors far beyond the control of a nation or a president dictate the price of gasoline.

When U.S. production goes up, the price of gas "is certainly not going down," said New York University statistics professor Edward Melnick. "The data does not suggest that whatsoever."

AP's statistical analysis examined monthly, inflation-adjusted prices and production from the Energy Department stretching back to January 1976, when they were first recorded. AP then turned over its analysis to Melnick and three others -- Phil Hanser, an economist and statistician at the energy consulting firm the Brattle Group; University of South Carolina statistics professor John Grego; and David Peterson, a retired Duke University statistics professor.

AP writes that the four "looked at the analysis, ran their own calculations, including several complicated formulas, and came to the same conclusion."

1 comment:

Danette said...

Bernie Sanders is on the radio weekly and continues to bang the drums that high gas prices are a result of speculation. Peak oil may indeed be part of the speculation but the immediate cause is gambling on prices. It's pretty sick that we can't keep Wall Street from padding their pockets when people suffer as a result.