The People of America's Oil and Natural Gas Indusry

The Price of Fuel and Ill-Conceived Policies

Jane Van Ryan

Jane Van Ryan
Posted December 30, 2010

Gasoline prices rose to their highest level in the past two years yesterday. According to AAA, the average price of gasoline climbed one penny Dec. 29 to $3.071 per gallon. This is the highest level since October 15, 2008, when the average price of gasoline reached $3.084.

If you've been reading this blog, you're aware that the cost of crude oil is the largest factor in the price of gasoline. Between November 17 and December 28, crude oil prices increased 26 cents per gallon to $2.18 per gallon ($91.49 per barrel), which was the highest level in October 3, 2008, when the per-barrel price reached $93.88.

Demand for gasoline and diesel fuel also have climbed recently. Last month, according to API's Monthly Statistical Report, gasoline demand rose 3.2 percent over November 2009. Demand for Ultra-Low Sulfur Diesel fuel, which is the type of diesel fuel required for on-road transportation, soared by 13.2 percent in November over the same month in the previous year.

Higher demand for diesel fuel can be indicative of an improving economy. It tends to signal that there are more trucks on the road delivering more goods and services to consumers who are willing to pay for them.

But it also raises an important question: If demand has increased and refineries need more oil to produce more gasoline and diesel, where is the oil going to come from? The administration recently announced that there will be no new drilling in the Atlantic, Pacific and eastern Gulf of Mexico for at least the next seven years, and the Department of the Interior is moving at a snail's pace to approve drilling permits in the central and western Gulf.

As blogger Peter Carlock writes today, the administration's ill-conceived anti-drilling policies are not going to help American consumers or help the environment. He calls the recent drilling moratorium "insane and completely pointless...It is NOT saving the Planet. It is not making us Cleaner. Others ARE still Drilling and INCREASING their exploration and Drilling, and THEY do not have to meet [the administration's] insane and oppressive Regulations."

Studies have shown that increased U.S. oil and natural gas development could create hundreds of thousands of jobs and give a tremendous boost to the economy. Under the administration's policies, however, this nation isn't reaping the benefits of energy development.

Peter is correct: Drilling is occurring and jobs are being created, but not here.