Fox Responds To SPR Release By Suggesting Oil Drilling In U.S. Is Down

Eric Bolling: “We're Not Going To Start Drilling More, We're Just Putting A Band-Aid.” From the June 23 edition of Fox News' America's Newsroom:

ERIC BOLLING: It's shortsighted, Bill. We need to be drilling our own oil, getting energy independence, rather than relying on a fuel source that we may need someday.

[...]

BOLLING: You do these things when prices are going in the wrong direction. Prices were coming down $11/barrel, 10 percent off the top in the right direction and then they do this. I think you may get a knee-jerk reaction down and then guess what's going to happen because we're not going to start drilling more, we're just putting a band-aid on a problem that's hemorrhaging. [Fox News, America's Newsroom, 6/23/11]

Fox Analyst Bill Kristol: “Why Doesn't The President Give Permits For Drilling?” From the June 23 edition of Fox News' Happening Now:

BILL KRISTOL: There's no serious economist or energy expert who thinks this a good time to release oil from the strategic petroleum reserve. Oil prices have actually topped out and have been going down the last three or four weeks, and in any case, this is a very small release. And it doesn't address the issue. Why doesn't the President give permits for drilling around the country? Why doesn't he tell his Environmental Protection Agency, which is part of his administration, to allow natural gas to be found and brought up in the domestic United States, where there turns out to be a ton of it? [Fox News, Happening Now, 6/23/11]

Fox Contributor Borelli: “If He Was Acting On Our Behalf, We Would Be Opening Up Drilling All Over The United States.” From the June 23 edition of Fox News' America Live:

DENEEN BORELLI: This is a bad move on the Obama administration. This - the reserves are for emergency purposes. You know, the prices spiked in Libya long ago. The prices are slowly coming down. Why is Obama doing this, making this decision at this point? We have a wealth of natural resources right here in our country. We should open up those resources and drill and dig for coal and do it now.

[...]

BORELLI: If he was acting on our behalf, we would be opening up drilling all over the United States. And remember, before Obama was even president, he said under my energy plan, energy costs would necessarily skyrocket. He wants to move in renewable sources of energy by making fossil fuels much more expensive to make them cost competitive.[Fox News, America Live, 6/23/11]

In Fact, Drilling Is Nearing A Twenty-Year High

There Are More U.S. Oil Rigs In Operation Than Any Other Time On Record. Data from the U.S. Energy Information Administration shows that in April 2011, the most recent data available, 896 crude oil rotary rigs were in operation -higher than any other time on record. The number of oil rigs in operation have increased dramatically since 2009:

[Energy Information Administration, accessed 6/23/11]

Independent Research Group: “Drilling Rig Activity Nears Twenty-Year High.” From a report by Headwaters Economics titled “Drilling Rig Activity Nears Twenty-Year High: Price and Technology Remain Key Drivers of Oil and Gas Drilling Activity”:

Oil and gas drilling activity has made a strong recovery since reaching a recession-induced low in late 2008. Nationally, drilling activity is at 91 percent of a twenty-year high last reached during the 2008 natural gas surge.

When it comes to land-based oil and gas drilling in the United States, there is little evidence that state and federal regulations are hampering industry's ability to respond to market signals. Price and the “primeness” of resource plays, determined by how well resource qualities fit with drilling and production technology, are the key drivers of the location of drilling. That drilling activity has recovered so quickly, and the location of new activity, suggest strong capacity on the part of industry to respond to market opportunities. [Headwaters Economics, 6/20/11]

The report also included the following chart (oil rigs in blue):

Expanded U.S. Drilling Is Not A Solution To Volatile Oil Prices

EIA Director: Expanding Drilling In Federal Areas Is Not Expected To Have A Large Impact On Prices. From the March 17 Congressional testimony of Richard Newell, administrator of the Energy Information Administration:

In the short-term, oil markets react to many competing factors in a global context, and it is extremely difficult to disentangle the near-term impact of mid-to-long-term developments in the context of oil markets that see typical daily price movements in the range of 1-2 percent, and much higher fluctuations at times. Long term, we do not project additional volumes of oil that could flow from greater access to oil resources on Federal lands to have a large impact on prices given the globally integrated nature of the world oil market and the more significant long-term compared to short-term responsiveness of oil demand and supply to price movements. Given the increasing importance of OPEC supply in the global oil supply-demand balance, another key issue is how OPEC production would respond to any increase in non-OPEC supply, potentially offsetting any direct price effect.

In the longer-term, greater domestic crude oil production no matter the cause - increased development on Federal lands, higher resource potential in current known fields, or wider application of advanced technology - would impact local economic activity, net oil imports, and the associated U.S. international trade balance resulting from oil imports. [Energy Information Administration, 3/17/11]

American Petroleum Institute Doesn't Even Claim Opening All Federal Areas To Drilling Would Lower Prices. CNNMoney.com reported:

[American Petroleum Institute's Rayola] Dougher said that if all federal land was open to oil drilling -- not just offshore but Alaska's wildlife refuge and all federal land in the West that isn't a national park -- the country could produce an extra 2.8 million barrels of oil a day by 2025.

Being that she represents the oil industry, Dougher gave the idea a hard sell.

She said it would create another 500,000 jobs, add $150 billion each year to government coffers and shave a significant chunk off the country's foreign trade deficit.

But one argument she didn't make was lower prices.

“How would that play out in the market, what impact would that have on prices,” she said, “we just don't know.” [CNNMoney.com, 4/25/11]

Bush Economist: “You Can't Change The Oil Price Very Much With The U.S. Exploration.” On the April 26 edition of MSNBC's Hardball with Chris Matthews, Doug Holtz-Eakin, who served on George W. Bush's Council of Economic Advisors said, “you can`t change the oil price very much with the U.S. exploration”:

MATTHEWS: Well, let me ask you this. If we were raping this continent, if we were drilling offshore everywhere, deep drilling, risking everything -- just like we did, down in -- with BP, if we were taking apart the ANWR and drilling everywhere, would the price of gas be much different? In the world market, since this all fungible, if we were doing all that here in the United States, would the price of gas be much different? I`m just asking that question.

HOLTZ-EAKIN: No, he can`t change the price very much. So, I mean, he`s trying to do things --

MATTHEWS: But the conservatives are saying all you have to do is pump like -- all you got to do is drill like -- Pawlenty said, just got at this, dig, dig, and dig, drill, drill, and drill, and somehow the price of the gas is going to down on the world market. You`re saying that`s not true?

HOLTZ-EAKIN: Well, I mean, you can`t change the oil price very much with the U.S. exploration. It certainly can`t change it quickly. We know that. And I think Republicans have been honest about that.

You also aren`t going to change the price of gasoline attacking oil companies. You know, the president is saying, oh, we got to get rid of $4 billion subsidies. That`s 3 cents a gallon, OK? That`s not a solution.

MATTHEWS: Would you get rid of them?

HOLTZ-EAKIN: Yes, but it`s not going to change gas prices that way. [MSNBC, Hardball, 4/26/11, accessed via Nexis]

AEI Scholar: “We Probably Couldn't Produce Enough To Affect The World Price Of Oil.” From a January 4 Greenwire article:

If gas prices keep increasing, Republicans probably will make a push on increased fossil fuel production, said Ken Green, resident scholar with the American Enterprise Institute think tank.

[...]

But experts disagreed about how much impact additional drilling could have. Crude oil is a global commodity, Green said.

“The world price is the world price,” Green said. “Even if we were producing 100 percent of our oil,” he said, if prices increase because of a shortage in China or India, “our price would go up to the same thing.

”We probably couldn't produce enough to affect the world price of oil," Green added. “People don't understand that.”

U.S. production could be negated by decisions that the Organization of Petroleum Exporting Countries makes, said Philip Verleger Jr., energy economist, and David Mitchell EnCana, professor of management, at the University of Calgary's business school.

“Suppose the U.S. were to boost production 1 million barrels a day,” Verleger said. “OPEC has the capacity to cut 1 million barrels.”

The oil industry has been able to convince people there is a connection between U.S. drilling and prices, Verleger said. [Greenwire, 1/4/11]

Lou Crandall: “Increased Drilling By The U.S. Would Not Alter The Global Balance Of Supply And Demand Greatly.” Lou Crandall, chief economist of Wrightson ICAP LLC, an independent research firm that analyzes high-frequency economic data, told Media Matters via email:

Higher oil prices today are a global phenomenon, and the additional supply from increased drilling by the U.S. would not alter the global balance of supply and demand greatly. Gasoline prices at the pump would be higher either way. The only difference is that a somewhat larger share of the revenue would accrue to domestic interests (governmental and private) rather than to foreign suppliers. [Email to Media Matters, 3/14/11]

Duckert: “Americans Tend To Exaggerate The Price Effects Of Fluctuations In Domestic Production.” According to Joseph Dukert, independent energy analyst and former president of the U.S. Association for Energy Economics said via email that “Americans tend to exaggerate the price effects of fluctuations in domestic production in relation to the total amount of oil in global trade. On the larger stage, the perception of geopolitical risks is more important.” [Email to Media Matters, 4/21/11]

Tom Kloza: “Drill Drill Drill Thing” Is “A Simplistic Way Of Looking For A Solution That Doesn't Exist.” From an April 25 CNNMoney article:

The problem is this: While increased oil and gas drilling in the United States may create good-paying jobs, reduce reliance on foreign oil and lower the trade deficit, it will have hardly any impact on gas and oil prices.

That's because the amount of extra oil that could be produced from more drilling in this country is tiny compared to what the world consumes.

Plus, any extra oil the country did produce would likely be quickly offset by a cut in OPEC production.

“This drill drill drill thing is tired,” said Tom Kloza, chief oil analyst at the Oil Price Information Service, which calculates gas prices for the motorist organization AAA. “It's a simplistic way of looking for a solution that doesn't exist.” [CNNMoney.com, 4/25/11]

EIA Analyst: Increased Offshore Production Would Amount To “Less Than 1 Percent Of The Total Projected International Consumption” In 2030. From a September 2008 Scientific American article:

So are promises of U.S. oil independence real--or rhetoric? The issue is not whether the U.S. can significantly reduce its reliance on oil imports with domestic, offshore oil, say both [oil expert Robert] Kaufman and [energy researcher Ian] Nathan, but whether there is enough that is recoverable to significantly lower the price of a barrel of oil on the global market.

Even by 2030, offshore drilling would not have a significant impact on oil prices, according to [EIA analyst Phyllis] Martin, because oil prices are determined on the global market. “The amount of total production anticipated--around 200,000 barrels a day--would be less than 1 percent of the total projected international consumption.”

And disruptions to the global supply affect the price of every barrel of oil the U.S. purchases, whether it be from Saudi Arabia, Venezuela or off the New Jersey coast. “Suppose the U.S. got all its oil domestically, and the price was $100 a barrel. Then the Saudi family was deposed,” disrupting that country's oil exports, Kaufman says. “The Saudis produce about 10 million barrels a day of the world's 85 million, so clearly prices would go up, because now there is this big shortfall of oil.”

“Do you think oil companies are going to sell [U.S. oil] to U.S. consumers for anything less than top price?,” he asks. “The answer is no.” [Scientific American, 9/12/08]