No Correlation Between Oil Drilling and Gas Prices

It’s the political cure-all for high gas prices: Drill here, drill now. But more US drilling has not changed how deeply the gas pump drills into your wallet, math and history show.

A statistical analysis of 36 years of monthly, inflation-adjusted gasoline prices and US domestic oil production by the Associated Press shows no statistical correlation between how much oil comes out of US wells and the price at the pump.

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.

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. And that’s especially true about oil drilling in the United States. More oil production in the United States 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, US oil production has increased 15 percent when seasonally adjusted. Prices in those three years went from $2.07 per gallon to $3.58.

US oil production is back to the same level it was in March 2003, when gas cost $2.10 per gallon when adjusted for inflation. But that’s not what prices are now.

That’s because oil is a global commodity and US production has only a tiny influence on supply.

When you put the inflation-adjusted price of gas on the same chart as US 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.

“ ‘Drill, baby, drill’ has nothing to do with it,’’ said Judith Dwarkin, chief energy economist at ITG investment research. Two other energy economists said the same thing, and others in the field have been making that observation for decades.

via More US oil drilling doesn’t mean lower gas prices – Nation – The Boston Globe.

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