Latest Data (Again) Confirms We Have Drilled Our Way to Lower Gas Prices
Former President Barack Obama said a few years back that, “We can’t just drill our way to lower gas prices.” But data released last week once again confirms that we continue to do just that — thanks to fracking.
According to GasBuddy, the average nationwide gasoline price fell to $2.35 a gallon last week, the lowest average price for this point of the year since 2005. The good news even prompted a write-up in the New York Times, which (not surprisingly) didn’t once credit fracking, only indirectly giving a nod to surging domestic oil production from shale,
“The immediate cause of the price break was the shock to global oil markets that came when the Energy Department reported this week that domestic inventories of both crude oil and gasoline had surprisingly surged the week before despite heavy driving on the Memorial Day weekend.”
Those inventories, of course, have surged due to the resurgence of shale oil production so far in 2017. After a two-year slump, American oil production is soaring again, with the active drilling rig count more than doubling since May 2016. The Energy Department recently predicted that domestic oil production will average 9.3 million barrels a day this year, thanks in large part to shale production that is projected to average a record 5.5 million barrels per day (mbpd) in July. The EIA is also projected all-time record production of more than 10 mbpd in 2018.
This domestic production has easily offset recently extended OPEC and Russia production cuts, delivering Americans low gas prices at a time of year in which we have grown accustomed to prices at the pump spike dramatically. For complicated reasons masterfully explained in a piece this week by Forbes contributor David Blackmon, gasoline prices typically spike during the summer driving season as refineries switch to producing pricier “summer blends” of gasoline meant to reduce pollution. Not so long ago, the combination of this annual transition and over-reliance on OPEC imports led to gas prices exceeding $4 a gallon as recently as 2008. But gas prices have been virtually been cut in half due to the shale revolution, and the savings this has meant for Americans really can’t be overstated.
As the New York Times notes, for every cent a gallon the price of gasoline falls, American consumers save $4 million. According to the American Automobile Association (AAA), Americans on average saved an average of more than $550 on gasoline costs in 2016. And a 2016 report from the Institute for 21st Century Energy Energy Accountability Series, which looked at what would happen if fracking were to be banned nationally, found gasoline prices would nearly double to their 2008 levels if not for shale.
It turns out, we can drill our way to lower gas prices. And Americans can thanks fracking for making the days of $4-dollar-a-gallon gas a distant memory as they get set to head out on family vacations this summer.