With that as background I find this interesting. From this morning's Houston Chronicle.
Perspective on our fuel prices
By Joe Barnes and James Coan
We should welcome recent news about dramatic increases in U.S. production of oil. But their impact on our domestic and foreign energy policies may be less earthshaking than we might believe.
The U.S. petroleum sector is surely in the midst of a remarkable revival. Output is up from just a few years ago, an increase driven in large measure by technological advances that permit sharply increased production from shale oil formations such as the Eagle Ford in South Texas. At the same time, domestic oil consumption appears to have reached a plateau. This is partly because of slow economic growth and high prices at the fuel pump.
But subdued U.S. consumption also reflects other, longer-term factors, notably increased fuel efficiency in automobiles. Rising output and flat demand have combined to reduce oil imports. As recently as 2005, net imports of fuel liquids (including petroleum), represented 60 percent of total consumption; in 2012, their share had dropped to 41 percent. Most analysts expect this trend to continue.
Let us stipulate: Increased domestic oil production is, on balance, a good thing. It will generate economic activity, bolster employment — particularly in the Houston area — and reduce our balance of payments deficit. It will also — all other things being equal — tend to reduce world prices for petroleum.
But increased domestic petroleum output will not — at least for the foreseeable future — either fully insulate American consumers from price shocks emanating from abroad or dramatically reduce the strategic importance of oil producing regions such as the Persian Gulf.
The fundamental reason: Oil markets are not national, but global. Prices are set by world-wide supply and demand. Here’s a good way to understand this critical point: Think of global oil production as water in a swimming pool. Remove a glassful from one end of the pool and the level declines everywhere; add a glassful at the other end and the opposite occurs. The inference for the United States is clear. Even were we to become fully self-sufficient in petroleum, major disruptions in supply elsewhere would lead to price increases here at home. The experience of Canada is a case in point. Though it has long been a major exporter of oil, Canadian consumers, like their counterparts to the south, have suffered from volatility in fuel prices...
...The bottom line: Increased U.S. oil production, however welcome, does not relieve us from the imperative of addressing possible oil shocks through domestic and foreign policy. Perhaps it’s time to open the champagne and raise a toast. But we should limit ourselves to a single glass.
If you were in a static economy that would be correct gentlemen. However, left to its own devices, the economy is dynamic. In the water example, if I were to remove a glass of water and then add another glass, the level would be maintained. However, if I were allowed to dump not a glass but five gallons of water, the level would rise. By the direct efforts of the government, the oil industry is being hampered in its efforts to fulfill a demand for more oil. And with China and India coming online, demand for more oil will force prices higher unless we can bring more oil on the market. But this article doesn't explain this or the fact we need more oil or the fact government is hindering our efforts to get more oil. It's only a weak attempt to justify high prices and CAFE standards. And CAFE arguably has the side effect of increasing highway deaths.
Sorry guys, it is not an article but an opinion piece, but please, this is bad.
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