The Boom in US Oil Drilling Hasn’t Lowered Gas Prices

From The Washington Post

By Brad Plumer

Last year, the world  pumped more oil out of the ground than ever before in history. In the first nine months of 2012, the world produced an average of 88.8 million barrels per day, about 2 million more barrels per day than in 2010. Nearly half of that increase came from new drilling in the United States.

Yet oil and gasoline prices remain at elevated levels. Brent crude is still trading for around $120 per barrel, higher than it was two years ago. Here in the United States, pump prices averaged $3.59 per gallon in early February, a record for the usually calm winter months. Again, that’s all despite the recent boom in tight-oil drilling in places such as North Dakota and Texas.

So why is that? The big thing to remember is that oil prices are a function of both supply and demand. If world demand for oil rises faster than producers can pump the stuff out, prices will go up. And that’s what is happening now.

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