We discussed the price of gas in the U.S. Specifically, when Obama took office, the national average cost for a gallon of gas was $1.86. We discussed why. See here for an article that covers the main points rather objectively.

Where Our Oil Comes From

A lot of Americans are surprised to discover that we don’t get much of our oil from the Persian Gulf. Here’s how it breaks down:

  • 38.8% — United States
  • 19.6% — Latin America
  • 15.1% — Canada
  • 8.1% — Persian Gulf
  • 5.2% — Africa
  • 3.1% — Other

So, the facts are that we get nearly twice as much oil from Canada as we do from the Persian Gulf. We also get nearly as much oil from Africa, but you rarely hear about our economic interests there.

Oil Production in the United States

To expand on the book, let’s look at oil production and the recent boom (that nobody hears about) in the United States. The following graph shows U.S. oil production over time.

According to a publication by Bloomberg on 1-9-2013, the U.S. is currently producing 7.32 million barrels per day, while Saudi Arabia is currently producing 9.57 million barrels per day. In another report by the Wall Street Journal on 1-18-2013, the U.S. increased oil production by roughly 779,000 barrels per day in 2012, and is projected to increase by an average of 900,000 barrels per day in 2013. Saudi Arabia and Russia (both energy independent) are currently the largest oil producers in the world, with the United States in a close third position. Within the next several years, the United States will overtake both and become the largest oil producer in the world. But, will that help our fuel costs? No.

Energy Independence

Canada is energy independent in a way that we’d love to be as a country. But, Canadian gas prices are higher than ours. In fact, they are linked to our gas prices as the graph below shows.

While Canada is energy independent, the cost of oil is not up to Canada. Oil is traded at the world level, and Canada doesn’t own the companies that are producing oil in Canada. This means that oil is sold in Canada (from producer to market) at roughly the same price as it could be imported at. Since Canada hasn’t socialized their oil production, they cannot be in control of the price of the oil that is produced. Venezuela is a good example of a country that has taken over their oil production. Thus, the same argument can be used in the United States. While energy independence would be great for other reasons (the money would stay within our economy), we would have to exert much more control over the industry itself in order to make that independence beneficial in terms of gas prices.

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