Canada has plenty of oil and gas, so much in fact that it is a net exporter and the single largest foreign supplier of oil and gas to the huge consumption market in the US. So why doesn't Canada have lower gasoline prices than the US and other countries?
The answer is simple. Oil and gas are highly concentrated markets where supplies and prices are controlled, or at least heavily influenced by a cartel. Unless you have the ability to flood the market with more oil and gas than OPEC, more "domestic" production will have very little effect on prices. And I put the word "domestic" in quotes because there is no such thing as "domestic" production. Every single player in the oil and gas industry is either a foreign or multinational company that produces and sells in international markets. More oil and gas from Alaska or the Gulf of Mexico will mean more oil and gas in international markets. New supplies will not all be sold in the US.
Our elected officials should know this. But here they go again telling us that increasing "domestic" production is the answer to $4 per gallon gasoline. Facing criticism from Republicans and the start of the 2012 Presidential election campaign, President Obama announced this week that he was expanding drilling for oil in Alaska and considering new exploration for oil off the Atlantic coast. Of course, these announcements are purely symbolic. They will not have an immediate effect on supply or prices, nor will they quickly open any new areas to drilling. They will, at best, lead to more production in years, maybe a decade, from now. And even then, they will have very little impact on OPEC's power to control prices in international and domestic markets.
John Howley
Woodbridge, New Jersey
The answer is simple. Oil and gas are highly concentrated markets where supplies and prices are controlled, or at least heavily influenced by a cartel. Unless you have the ability to flood the market with more oil and gas than OPEC, more "domestic" production will have very little effect on prices. And I put the word "domestic" in quotes because there is no such thing as "domestic" production. Every single player in the oil and gas industry is either a foreign or multinational company that produces and sells in international markets. More oil and gas from Alaska or the Gulf of Mexico will mean more oil and gas in international markets. New supplies will not all be sold in the US.
Our elected officials should know this. But here they go again telling us that increasing "domestic" production is the answer to $4 per gallon gasoline. Facing criticism from Republicans and the start of the 2012 Presidential election campaign, President Obama announced this week that he was expanding drilling for oil in Alaska and considering new exploration for oil off the Atlantic coast. Of course, these announcements are purely symbolic. They will not have an immediate effect on supply or prices, nor will they quickly open any new areas to drilling. They will, at best, lead to more production in years, maybe a decade, from now. And even then, they will have very little impact on OPEC's power to control prices in international and domestic markets.
John Howley
Woodbridge, New Jersey
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