The Personal And Economic Benefits Of Cheaper Oil
Posted 10/17/2014 06:23 PM ET
Object Lessons: A
barrel of oil has tumbled to $83, or 22% below its June high —
unambiguously good news writ large for consumers, motorists and the U.S.
economy overall, and a teachable moment if there ever was one.
The U.S. imports about 3.5 billion barrels of oil a year. So a $20 reduction in price is equal to a $70 billion tax cut. And since we consume more than twice that much oil each year, the tax cut is closer to $150 billion. Gas prices at the pump are down 40 to 50 cents a gallon in some areas. Not bad.
Why are prices falling? Yes, the world economy is slowing down, and with it global demand for crude. That's especially true with welfare-state Europe looking again like an economic basket case.
But a bigger factor is that Saudi Arabia is turning on the spigots. The Saudis aren't stupid. They see the writing on the wall from the shale oil and gas drilling revolution in America. U.S. output is surging, with production double where it was just seven years ago. By pushing down the price, Saudi sheiks may be trying to drive out high-cost drillers to slow future production.
But the price would have to go much lower than $85 a barrel to slow U.S. producers — especially because technology is lowering our drilling costs every day.
Another piece of very good news here is that the Saudis are crippling their former OPEC partners-in-crime. The Iranians and Venezuelans are screaming bloody murder and demanding emergency OPEC meeting to curtail production. The Saudis are in no hurry to do so.
The economic reality is that as the U.S. becomes more energy-dependent and can even reach energy dominance in the years to come, OPEC is becoming a toothless tiger. It can no longer hold the world hostage to high oil and gas prices.
Who do we have to thank for this? Certainly not the White House, though President Obama will certainly take a bow.
The real heroes are U.S. energy entrepreneurs who brought us fracking and horizontal drilling, and have created an energy-abundant future with shale production. This has already turned the U.S. into the world's largest natural gas producer. Texas, Oklahoma and North Dakota have more than doubled their oil production.
Amazingly, it was only a few years ago that Obama sounded the Malthusian alarm that the U.S. had only 2% of the world's oil reserves, so we had to move toward green energy before we ran out. Now we may have closer to half the world's energy supply.
Promising new finds in North Dakota and Texas suggest our shale oil and gas reserves are much larger than previously believed. California is sitting on nearly $2 trillion in oil and gas in the Monterrey Shale. Obama couldn't have been more wrong when he said we are running out of oil and gas. No, we are running into it.
All this is happening at a time when the left and the greens have declared all-out war on fossil fuels. They too are on the wrong side of history. Their agenda of turning off America's spigots would erase hundreds of thousands of high-paying energy jobs and do severe harm to American consumers.
Imagine how much the price would fall if we started building pipelines, repealed the ban on oil exports, drilled on public lands and didn't have an EPA that irrationally views fossil fuel production as the devil's work.
This is a teachable moment for American voters, and the lesson is simple: Every barrel of shale oil America drills is another nail in OPEC's coffin. The recent price declines are another hopeful signal that this economically destabilizing cartel known is finally unraveling.
Let's hasten its demise, provide a real and lasting stimulus to the economy and defund terrorists with a national policy of "drill baby drill."
The U.S. imports about 3.5 billion barrels of oil a year. So a $20 reduction in price is equal to a $70 billion tax cut. And since we consume more than twice that much oil each year, the tax cut is closer to $150 billion. Gas prices at the pump are down 40 to 50 cents a gallon in some areas. Not bad.
Why are prices falling? Yes, the world economy is slowing down, and with it global demand for crude. That's especially true with welfare-state Europe looking again like an economic basket case.
But a bigger factor is that Saudi Arabia is turning on the spigots. The Saudis aren't stupid. They see the writing on the wall from the shale oil and gas drilling revolution in America. U.S. output is surging, with production double where it was just seven years ago. By pushing down the price, Saudi sheiks may be trying to drive out high-cost drillers to slow future production.
But the price would have to go much lower than $85 a barrel to slow U.S. producers — especially because technology is lowering our drilling costs every day.
Another piece of very good news here is that the Saudis are crippling their former OPEC partners-in-crime. The Iranians and Venezuelans are screaming bloody murder and demanding emergency OPEC meeting to curtail production. The Saudis are in no hurry to do so.
The economic reality is that as the U.S. becomes more energy-dependent and can even reach energy dominance in the years to come, OPEC is becoming a toothless tiger. It can no longer hold the world hostage to high oil and gas prices.
Who do we have to thank for this? Certainly not the White House, though President Obama will certainly take a bow.
The real heroes are U.S. energy entrepreneurs who brought us fracking and horizontal drilling, and have created an energy-abundant future with shale production. This has already turned the U.S. into the world's largest natural gas producer. Texas, Oklahoma and North Dakota have more than doubled their oil production.
Amazingly, it was only a few years ago that Obama sounded the Malthusian alarm that the U.S. had only 2% of the world's oil reserves, so we had to move toward green energy before we ran out. Now we may have closer to half the world's energy supply.
Promising new finds in North Dakota and Texas suggest our shale oil and gas reserves are much larger than previously believed. California is sitting on nearly $2 trillion in oil and gas in the Monterrey Shale. Obama couldn't have been more wrong when he said we are running out of oil and gas. No, we are running into it.
All this is happening at a time when the left and the greens have declared all-out war on fossil fuels. They too are on the wrong side of history. Their agenda of turning off America's spigots would erase hundreds of thousands of high-paying energy jobs and do severe harm to American consumers.
Imagine how much the price would fall if we started building pipelines, repealed the ban on oil exports, drilled on public lands and didn't have an EPA that irrationally views fossil fuel production as the devil's work.
This is a teachable moment for American voters, and the lesson is simple: Every barrel of shale oil America drills is another nail in OPEC's coffin. The recent price declines are another hopeful signal that this economically destabilizing cartel known is finally unraveling.
Let's hasten its demise, provide a real and lasting stimulus to the economy and defund terrorists with a national policy of "drill baby drill."
Read More At Investor's Business Daily: http://news.investors.com/ibd-editorials/101714-722388-falling-oil-prices-good-for-motorists-consumers-economy.htm#ixzz3GVo1eWbr
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