Oil Prices, Gas Prices and Domestic Production

Jeff Bingaman, chairman of the Senate Energy Committee, has a well-deserved reputation for focusing on facts. He worries about the many myths surrounding gasoline prices, oil prices and domestic production. Today, on the Senate floor, he called out some of these fictions and refocused attention on the facts.

| March 7, 2012

“I wanted to speak for a few minutes about gasoline prices, which my colleague from Utah just talked about a few minutes ago. Also, about domestic oil and gas production and also about access to federally-owned oil and gas resources. These are issues that have been raised by numerous senators on this Transportation bill. They are issues of critical importance to our country’s economy, to national security and to resource management. And I’ve been increasingly concerned that the issues that we’re debating, and the facts that are being put out there are often not the true facts. There is widespread misunderstanding of what needs to be done to deal with this set of issues, in my opinion.  

“Let me start with the issue that’s most important to most Americans – and that is, the price of gasoline at the pump, and the price of oil. We need to understand clearly what is causing this, and we need to be direct with our constituents about what is causing this.

“Let me state this as clearly as I can – what I believe is really without dispute among experts. That is, we do not face cycles of high gasoline prices in the United States because of a lack of domestic production. We do not face these cycles of high gasoline prices because of lack of access to federal resources, or because of some environmental regulation that is getting in the way of us obtaining cheap gasoline.

“As was made clear in a hearing we had in the Senate Energy Committee in January, the prices that we are paying for oil and the products refined from oil, such as gasoline, are set on the world market. They are relatively insensitive to what happens here in the United States with regards to production.  Instead, the world price of oil and our gasoline prices are affected more by events beyond our control, such as instability in Libya last year or instability in Iran and concerns about oil supply in Iran this year.

“First, I’ve got two charts that I think clearly make this point very clearly.

“The first chart I believe is very instructive. This is entitled, ‘Weekly Retail Price for Premium Unleaded Gasoline, Including Taxes Paid.’ And, there are two lines on the chart. The top line contains the weekly retail prices in France, Italy, Belgium, Netherlands and the UK. You can see how those prices fluctuate. This is through January of last year. The comparable prices paid in the United States are reflected in this bottom line, and of course, this is because we pay much less in taxes than these other countries.  It’s a useful chart that makes a couple of important points. First, that the price patterns are remarkably similar in all countries. That is, the prices for gasoline in all these countries reflect the world price of oil. Second, while the patterns are similar, the U.S. price is significantly lower, because of the lower taxes that we pay in this country.

4/18/2012 11:40:09 AM

PS/ It's quite unfair of MEN to publish such a one-sided, politically motivated,deceitful propaganda piece without providing the other side's POV

4/18/2012 11:37:50 AM

It's not that tough to decipher the truth: [a] world demand for oil has doubled in the past decade (growing middle class in Asia). [b} US monetary policy and exploding govt spending/debt have devalued the dollar (all commodities are more expensive now). [c] Naive ( or is it treasonous?) Obama foreign policy in regards Iran nuclear threat & wishy-washy stance on defending Israel and unrest in MidEast in general. [d] Obama policy have eliminated off shore drilling and brought new permits on govt lands to a standstill. If the Iran situation does cut off Mideast oil, then our ability to provide the difference quickly with domestic supply is weakened...{a} is out of our control. {b} is the Democrats' fault. [c &d] is Obama & the TreeHuggers' fault-- weakens confidence in the speculators, driving up the price suddenly over the last few months as Iran rattles its sabre....And Bruce: Exxon sits on its profits without distributing them to shareholders due to the uncertainty of the future under a socialist, anti-business US administration and a failing Europe. Even China is being brought down by world-wide socialist govt spending/borrowing....Increased US production won't significantly add to world supply, but a change in policy would instill confidence in the market place and futures prices would come down.

4/15/2012 6:26:50 PM

For the consumer it is hard to know who to believe when it comes to gas and oil production. What I do know is a few years ago I purchased some Exxon stock to hedge the rising price of gas. At the end of the first quarter Exxon announced it had just made record profits, but the stock did not go up one bit nor the dividend. Same the second quarter. That is when I sold Exxon stock. Oil companies have a list of excuses. Seems to me that there is more to this than the average person has access to or understands. I wish I could figure it out better but when you can't seem to trust any of the reports either from the oil producers or our government it leaves us confused.

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