The other day, John McCain visited an oil rig in the Gulf of Mexico to call for more offshore drilling. The massive Chevron rig produces 10,000 barrels of oil a day.
Meanwhile, I just filled up my new Honda Fit with gas for the first time. After driving 282 miles, I bought 9.47 gallons at $3.62 a gallon. So I’m getting 29.6 mpg, mostly in the city.
What’s the connection? The actions of millions of Americans like me—as we trade big cars for smaller ones, drive less, or do both—are going to have a whole lot more impact on oil prices, more quickly, than drilling for more oil.
In fact, they already are. Gas prices have been falling by more than a penny per day and the price of oil has dropped from about $147 a barrel to about $115 a barrel in the last couple of months for one primary reason: Americans are using less gasoline.
This is a reminder that the debate over offshore drilling, while it makes for good visuals and sound bites, is at best irrelevant and at worse a distraction from the big energy and environmental issues that we need to address.
That shouldn’t be surprising. The U.S. is currently responsible for about 5.7% of global oil production. The U.S. accounts for 23% of the global oil consumption. So it stands to reason that we can have a greater impact by consuming less than we can by producing more.
Of course, consuming less oil is also good for the environment and for our energy and economic security.
“It’s at least order of magnitude more important to worry about the demand side, rather than the supply side,” says Rick Dukes, director of the Center for Market Innovations at the Natural Resources Defense Council.
Last week, I spoke with Rick and his colleague Andy Stevenson at NRDC about energy prices, drilling and efficiency. They are both business guys—Rick is a former McKinsey consultant, Andy’s a former hedge fund investor—and so they naturally turn to markets and data when they want to understand what’s happening with energy.
They sent me more data than I can absorb, or reproduce here, but here are their two major points.
First, offshore oil drilling won’t drive down prices, at least not by much. Citing US EIA reports, Rick and Andy say that 200,000 barrels per day by 2030 of extra output from additional outer continental shelf drilling represents a mere 3% increase in projected US production in 2030 and only a 0.2% increase in global output in 2030. The Department of Energy says the projected price impact of opening up additional outer continental shelf drilling in the US is “insignificant”. If McCain knows that (and he should), he’s being a cynic when linking offshore oil drilling to price cuts.
Second, conservation and efficiency can make a difference. Indeed, they already have. U.S. consumers have reduced our oil consumption by about 860,000 barrels a day in the past seven months. This reduction helped offset growth in demand from China and the rest of the developing world. Rick said, by email, that the “U.S. has single-handedly corrected a chronic global supply demand imbalance, helping to drop crude prices nearly 25% over the past 2 months.”
I asked them how we can sustain and build on this momentum, especially if oil prices continue to fall. They told me they’d like to see more aggressive government fuel-economy standards for cars, higher mileage standards for heavy duty trucks and more government investment for public transportation (which could pay dividends for everyone in the form or lower oil prices).
Changing driving habits also would do more good than drilling.“Even the much-mocked tire opportunity saves another 600,000 barrels a day,” Rick says. (Although Edmunds.com did not find that tire pressure had much effect on fuel economy.)
The other problem with the debate over offshore oil drilling is that it’s a diversion from the debate we really should be having over how to transform our entire energy economy. Bryan Walsh had an excellent piece on that last week in Time