Is Energy Independence Really on the Oil and Gas Agenda?


"Inadequate infrastructure has U.S. oil and gas priced below global rates, but when transportation costs are reduced, companies will ship their oil to the highest bidder."

With gasoline scaling $4 a gallon recently, plans announced last week by international oil giant BP to export U.S.-produced crude oil ought to have Americans howling. For such a plan to be good energy policy—rather than merely profitable for the oil industry—the United States would have to be producing more than enough oil to meet its own needs. But the country produces nowhere near that amount. Nevertheless, the industry's deceptive campaign to make the public and policymakers believe that the United States is on the verge of energy independence seems to be succeeding—a push that is really just a smokescreen for selling the country's oil and natural gas to the highest bidder.

The U.S. is a long way from being free of oil imports, and there is no realistic prospect that we'll ever produce enough oil domestically to satisfy our needs at the current level of consumption.

The price of oil in the United States is already based on world prices. This is because oil can be shipped using the world's ocean-going tanker fleet to wherever the price is highest. This tends to equalize prices across the globe once transportation costs are included. But, because the infrastructure in the interior of the United States is inadequate for cheaply moving the oil now being produced there to oil ports, the price of this oil trades at a discount to world prices. So, whenever companies or trading firms believe they can reduce transportation costs such as those from landlocked North Dakota, they will try to move oil that is underpriced to more profitable markets. . .View Full Article

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