Is the Oil Boom Helping Prices at the Pump?
Texas is getting more oil out of the ground than is has since the great boom of the 1970s. The oil fields of North Dakota are, for the first time ever, producing over one million barrels a day. Across the country, the boom has lead to predictions that the US will overtake even Saudi Arabia in oil production by the end of the year. But is all that drilling helping US consumers at the pump?
A quick look at the numbers before the long weekend would indicate not. Prices were about 20 cents per gallon higher than this time last year, according to the US Energy Information Administration.
There’s a lot more to what you pay when you fill up your car than how much oil is out there. Market speculation can inflate prices. Then there’s how much it costs to move oil around. You can drill for all the crude you want, it’s another thing to bring it to a refinery. Add to that the role played by OPEC in setting prices, and it’s clear that what you’re paying is not dictated by simple supply and demand.
Nonetheless, some analysts say consumers are benefiting from the boom. They just might not notice it.
While price right now may be higher than this time last year, “the first half of 2014 was the cheapest first half of the year for gasoline since 2010,” points out Tom Kloza, Chief Oil Analyst at Gasbuddy.com.
He says, so far this year, gas is about two cents cheaper than last year and five or ten cents cheaper than the year before. It’s a discount, he admits, that’s “not enough to go out and buy a boat, but it still is cheaper.”
What’s more difficult to gauge is how much high gas prices could be if it weren’t for the boom.
Kloza believes the US boom helped stave off a major jump in prices after the outbreak of the insurgency in Iraq. He points out that prices rose after the fall of the Iraqi city of Mosul, but they didn’t rise as high in North America like they did in some global markets.
“I would probably submit that if it were not for this oil boom or if the oil boom were 50 or 60 percent of what it is, we’d probably be paying over four dollars pretty consistently this driving season,” says Kloza. “And people would notice that, because that’s a number than engenders some rancor.”
He says prices through the summer will depend to a great extent on whether we have a hurricane season that interrupts refining in the Gulf.