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Pumping More U.S. Oil Won't Lower Prices, Consumer Group Says

Alternative energy investment will be more help

September 15, 2008

A leading consumer group is opposing an expansion of domestic oil production, saying conservation and production of alternative energy would have much greater impact on the price of gasoline.

Consumer Federation of America analysis finds that fuel economy, conservation, and alternative fuels deliver over 50 times as much oil savings as expanded drilling can produce with far greater impact on the price of gasoline.

In a new report entitled "A Boom for Big Oil - A Bust for Consumers" the Consumer Federation of America assembles and analyzes federal data from a variety of agencies, providing a what it says is a first-time comparison of four different policies on a consistent basis in the next two decades: 1) Expanding Drilling on the Outer Continental Shelf (OCS), 2) Raising Fuel Economy Standards; 3) Increasing Alternative Fuels; 4) Fuel Conservation Measures.

"While much of the recent debate over how to ease consumer pain at the pump has been focused on expanding drilling for oil, this analysis shows that it is only salt on the wound," said report author Mark Cooper, CFA Director of Research.

"Drilling won't bring gas prices down or lessen our dependence on oil, short or long term. It will only fatten oil company coffers," he noted. "And, it diverts attention, support, and resources from policies that can produce much bigger results for consumers and the nation."

Combining recent analyses from the Energy Information Administration (EIA) and the National Highway Traffic Safety Administration (NHTSA), as well as oil company financial statements, the report findings include the following:

• Efficiency, conservation, and alternative fuels deliver over 50 times as much oil savings as expanded drilling can produce.

• Expanded drilling provides greater profits for domestic oil companies with no benefits to the consumer. In the first six months of 2008, the net income of domestic oil producers was 50 percent higher on U.S. production than on international production because oil is sold at the world price and domestic production costs are far less than international productions costs for domestic producers.

• Raising fuel economy standards to "maximum feasible" levels based on today's market can deliver 609 billion gallons of gasoline over the same 20 year period, which is over 25 times the amount that could be produced from OCS drilling.

• The difference between the National Highway Traffic Safety Administration's proposed fuel economy rule and a "maximum feasible" fuel economy standard is 280 billion gallons of gasoline, over ten times the amount OCS could deliver.

• A full range of mechanical and behavioral steps including getting regular tune ups, slowing down, properly inflating your tires, avoiding idling, and using the air conditioning sparingly could lower gasoline consumption by 13 percent.

• Demand-side measures (efficiency and conservation) combined with alternative fuels can save over 1.3 trillion gallons of gasoline over a 20-year period.

• Reductions in demand and increases in alternatives in the past year have kept prices from rising even more than they have and these policies can lower prices in the future.

The report blames political hype for the rush to open the OCS. Calling the Energy Independence and Security Act (EISA) the single most important step to reduce oil consumption and consumer pain, the report says responsibility for action on the current energy crisis now rests squarely with the Bush Administration, which has responsibility for executing the law, including raising fuel economy standards to maximum feasible levels.

NHTSA's latest proposed rulemaking, according to the report, falls well short of what is "maximum feasible" due to flawed assumptions, clearly inaccurate and out of sync with today's market and consumer behavior.

"Congress did its job last year by passing higher fuel economy standards. The Administration has dropped the ball and left consumers holding the bag," said Cooper. "Policy makers should be focusing on the options that can actually solve the problem. Expanded drilling makes little contribution even in the long term. The OCS bandwagon will only pad the wallets of oil companies, not consumers," said Cooper.

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