Why can’t we drill more in Texas to lower gas prices? KSAT explains

SAINT ANTONY – Gasoline prices have hit record highs in Texas and across the country, raising the question, “how can we bring prices down?”

Some say drilling more here on American soil might solve the problem, but it’s not as simple as building an oil rig overnight and extracting oil from the ground.

Illustration showing the Eagle Ford shales. (ksat12)

About 10 years ago, a small town 70 miles south of San Antonio hit a record high in the oil industry.

Tilden, Texas experienced a huge oil boom, which created thousands of jobs and changed the city’s landscape.

McMullen County Judge James Teal took office in 2011, just as a spate of drilling began in the Eagle Ford Shale, which spans 20,000 square miles across 26 counties in Texas, from the Texas-Mexico border through the counties east of Waco.

From 2010 to 2015, McMullen County saw its taxable sales increase by 53%, more than double that of any other Eagle Ford Shale county.

“Activity was instantaneous with people from large communities traveling to and from, staying in hotels. Every business – everything was completely full,” Teal said.

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Joe’s Food Market was one of those businesses that was attracting a host of new customers. The general store has been family-owned for over a century and offers everything from fresh sandwiches to toilet bowl repair kits. Even all those years of business couldn’t have predicted Eagle Ford’s boom time.

“We have a hotel now. I never thought Tilden, America would have a hotel. We have a pilot. I mean, and we have a Valero right across from the Pilot. We now have two red lights,” said Misty Verastegui, co-owner of Joe’s Food Market.

Welcoming sign in Tilden, Texas. (ksat12)

Additional funding for drilling in the Eagle Ford shales meant that McMullen County could have a 24-hour sheriff’s department for the first time. Infrastructure was also improved in the town.

“We were able to pave almost all the roads in the county. We are currently working on a streets and drainage project,” Teal said.

At the height of the boom in McMullen County, they had 32 oil rigs running. Now there are only three. The county judge said they were prepared for a resurgence of this activity if it happened. But that’s not a quick response to these high gas prices.

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High gasoline prices are seen in front of a medical billboard Wednesday, May 11, 2022 in Milwaukee. (AP Photo/Morry Gash) (Copyright 2022 The Associated Press. All rights reserved.)

“When the price of oil goes up, the price of everything goes up,” said Anne Bradbury, CEO of the American Exploration and Production Council. “It’s something we all experience. We don’t just pay more for gasoline, but for everything from milk to orange juice to medicine. Even the price of clothes and shoes is higher This is partly because oil is so important to our daily lives.

“That’s part of the reason why energy inflation is such a concern because we’re using oil not just in gasoline, but also in household goods, in food production. Really, really in our economy and in our way of life. So many things are made from petroleum,” says Bradbury.

The finger of rising prices is inevitably pointed directly at the oil companies.

Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at the American Petroleum Institute, said, “Oil is a global commodity that is priced in world markets. But even at retail, the price you see at the pump is a reflection of the typically independent business owner trying to get a return on the cost of buying the fuel they made.

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According to the American Petroleum Institute, almost 99% of gas stations are independently owned, although one company may own multiple stations. The owners sign a license agreement with the oil companies to put their name on the marquee. Like any other business, the station owner has to buy the fuel and all the other items they sell, like candies and snacks, not to mention labor costs and many other costs. It is simply the price to pay for doing business. They recoup some of that expense by setting a gas price, which creates competition with the other gas station across the street.

“Prices are determined by market fundamentals and the principles of supply and demand, as well as the competitive market,” Macchiarola said.

The oil market is global. What happens to supply and prices around the world affects us here at home. These prices are also determined weeks or months before the customer sees them posted at their local gas station.

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“We ban all Russian oil, gas and energy imports.” – President Joe Biden

President Joe Biden announces a ban on Russian oil imports, increasing the toll on the Russian economy in retaliation for his invasion of Ukraine, Tuesday, March 8, 2022, in the Roosevelt Room of the White House in Washington. (AP Photo/Andrew Harnik) (Copyright 2022 The Associated Press. All rights reserved)

On March 8, 2022, President Joe Biden announced that the United States would ban oil imports from Russia after the country waged war on neighboring Ukraine. After that, we saw prices start to skyrocket, but that price spike wasn’t because the Russian oil ban meant a drastic drop in US oil supply. The United States imported only about 500,000 barrels of Russian oil per day, a fraction of what the United States consumes per day. The United States uses approximately 21,000,000 barrels of oil per day. According to US fuel and petrochemical manufacturers, only about 1% of our refined crude oil comes from Russia.

“It’s the fact that in the world market, Russia was such a big oil producer that it produced more than 10 million barrels a day. (It is) the third largest oil producer, the first largest oil exporter in the world, before the invasion,” Frank Macchiarola said.

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For example, a drop in oil supplies in Europe, which is much more dependent on Russian imports than the United States, can drive up prices further for Americans. It all boils down to the fact that the oil market is a global market. At the start of June 2022, gasoline prices averaged above $4 per gallon in every state. This is the first time in history that all 50 states have exceeded the $4 mark. Prices can jump a few cents at a time. In San Antonio, they’ve been known to jump 20 to 30 cents overnight.

Oil rig used in Tilden, Texas. (ksat12)

One proposed solution is to produce more oil in the United States.

“It’s really the only way to bring down the price of crude and therefore bring down the price of gasoline,” Bradbury said.

It also means diesel fuel. Lowering these prices could lower the price of goods and services in almost any industry, but drilling more is not an easy fix.

Bradbury says, “it takes many years to explore, to develop, to get additional permits for water rights of way, to remove infrastructure capacity that might be needed.”

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Back in McMullen County, trucks hauling equipment for oil projects can still be seen in town, but much less than 10 years ago. Judge James Teal said: ‘It’s just very different from what it was. There’s not the kind of boomtown vibe.

The good news is that tanker traffic is picking up. Tiny homes known to many as “man camps,” places where oilfield workers stayed during the height of the Eagle Ford Shale boom, have been turned into hotels. One is nearly full for the first time in years.

“They are busy again. So it’s good for local business owners. – Misty Verastegui, co-owner of Joe’s Food Market

There are lessons learned from the first time that the folks of McMullen County will keep in mind, should an increase in oilfield activity continue to be trucked in.

“Now that we know everything, you know, we’ve decided who or who we can’t sleep with next time, you know, or which companies or, you know, just little things like that,” Verastegui says.

According to Judge James Teal, the benefits the county still derives from the Eagle Ford Shale boom are not so small all these years later.

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“McMullen County has also been able to save money where we could and maximize dollars from tax revenue and have been able to maintain a good fund balance and prepare for the days when things go wrong. not so good,” Teal said.

Copyright 2022 by KSAT – All rights reserved.

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