Gasoline prices are plummeting as U.S. oil production from shale formations booms, reaching more than nine million barrels per day through Nov. 28. Gasoline is now hitting four-year lows and oil prices are hitting five-year lows.
But it was just two years ago that President Obama said “we can’t just drill our way to lower gas prices” in a speech bashing Republican calls for more drilling.
“Last week, the lead of one news story said, ‘Gasoline prices are on the rise, and Republicans are licking their chops,'” Obama said in a 2012 speech in Miami, Florida. “Only in politics do people greet bad news so enthusiastically.”
“And you can bet that since it’s an election year, they’re already dusting off their three-point plans for $2 gas,” Obama continued. “I’ll save you the suspense: Step one is drill, step two is drill, and step three is keep drilling. We heard the same thing in 2007, when I was running for president. We hear the same thing every year. We’ve heard the same thing for 30 years.”
“Well the American people aren’t stupid,” Obama said in a speech in Miami. “You know that’s not a plan — especially since we’re already drilling. … You know there are no quick fixes to this problem, and you know we can’t just drill our way to lower gas prices.”
Obama may want to change his tune, however, since the average gasoline price is now $2.71 per gallon and the price of oil is under $70 per barrel. Gas prices in 2012 averaged $3.60 per gallon, nearly $1 higher than today, and the price of oil averaged about $102 per barrel (when the Brent crude oil price and West Texas Intermediate price are averaged together).
But the bigger problem for Obama is this: the huge decline in oil prices, and thus gas prices, is due to a boom in U.S. oil production. While weaker than expected economic growth has put some downward pressure on prices, the main story is booming production thanks to hydraulic fracturing and horizontal drilling.
“Oil’s rout gained momentum in October with prices falling still further in November as plentiful supply outpaced demand and pushed Brent below $80/bbl,” the International Energy Agency reported in November. “A strong US dollar and rising US light tight oil output outweighed the impact of a fresh Libyan supply outage in early November.”
U.S. oil production grew from 6.5 million barrels per day in 2012 to 7.4 million barrels per day in 2013. The Eagle Ford shale formation in Texas produced its billionth barrel of oil last month, the Houston Chronicle reports.
Bloomberg reports that “U.S. oil production expanded to 9.08 million barrels a day through Nov. 28, the fastest rate in weekly records that started in January 1983. … An estimated 80 percent of shale output next year will still be profitable from $50 to $70 a barrel.”
When President Obama made his remarks in 2012, he was basically at the beginning of his reelection campaign and his speech came amid reports that oil production on federal lands was falling.
Obama was also in the midst of trying to sell his green energy agenda and get rid of tax breaks for oil companies. The president was also trying to build support for his plan to expand green energy production on federal lands.
According to government data, oil production on federal lands fell from more than 1.9 million barrels per day in 2010 to 1.6 million barrels per day by 2012. While oil production on federal lands was falling, production on state and private lands was booming.
Oil production on non-federal lands grew from 3.5 million barrels per day in 2010 to 4.6 million barrels per day in 2012. This upward momentum has not slowed since and states like North Dakota and Texas continue to break production records.
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