I have been testing my position that drilling more oil wells in the USA or building the Keystone pipe line "is not going to reduce the price of gas" on my friends. What I have been finding is that they are very hard headed and think that more drilling or the Keystone pipe line "will" reduce the price of gas. I will admit that it may have a very very small impact on price. The affect will be so small that we will not even notice it. What I say will happen is that we will earn more money here in the USA and that money will stay here in the USA rather than go to someone with a towel on their head. We are now borrowing money from China to buy gas from countries outside the USA. That is our main problem. We can't compete building TV sets or Cell Phones, but we can compete on producing oil right here.
Have you noticed that you seldom hear anyone talking about the "balance of trade"? We used to have a trade surplus, but that has all changed. Now, for many years, we have been running a trade deficit. I think that you can see that we can't do that for ever. What do you think is going to happen when our credit runs out? We would look just like Greece. If we were competitive with the rest of the world building TV sets or Cell Phones, we could build them and buy our oil with that money from others countries. It would not be a problem. Importing oil is not a problem for China. They pay for the oil with the money they earn with their positive trade balance.
It is like the situation where we would start building TV sets here again. Do you think that would make the price of TV sets go down? What if we could build TV sets cheaper than China? Would that make TV sets here cheaper? NO! Think of it this way. If you could build TV sets for 5% less than China, why would you charge less here when you could sell your TV set to Mexico for 5% more or the same price that China was charging? You wouldn't and it is the same with oil. In the past, I gave the same example for cars made here. We can't export cars because our cars cost too much if made here. What we can do is to build plants in China and build cars there so that we can sell those cars around the world. Oil production and the refining of Canadian oil here is one of the few things that we can do here competitively. We don't have very many areas where we are competitive so we can't waste an opportunity to produce or refine oil here.
I hope that you are following this and don't get fooled by people who say that finding more oil here is not going to lower the price of gas and then conclude there is no serious reason to drill in the Gulf or build the Keystone pipe line.
