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June 12th, 2008 (Modified on June 26th, 2008)

A Chance to Lower Gas Prices



A Senate subcommittee rejected a key bill yesterday that had the potential to help Americans move towards energy independence, and significantly lower gas prices. The bill would allow drilling for oil and natural gas reserves 50-200 miles off the Atlantic and Gulf shores. Estimates predict the off-shore reserves contain up to 8.5 billion barrels of oil and 29 trillion cubic feet of natural gas, as well as the potential for undiscovered resources of up to 86 billion barrels of oil and 420 trillion cubic feet of natural gas.

Economists believe the only way to lower gas prices may be to increase oil production. The US is currently 67% dependent on foreign oil. That percentage is sure to climb if Americans do not increase oil and natural gas production. Supporters of the bill warn that since current gas prices have climbed so high and so fast with out a major disaster, a terrorist attack on supply lines, a major storm in the Gulf, or a topple of a major oil producing country could rocket gas prices to $200 a barrel. US oil reserves used to hold 8-10 million barrels, but today that number has shrank to much less.

While a majority of the country remains fixated on soaring gas prices, Senator John Peterson, R-Pa, warns that the rising cost of natural gas should become a greater cause for concern. Nearly every major US industry depends on natural gas to produce products such as steel, fertilizers, and plastics. In 2007 Dow Chemical paid $8 billion a year for natural gas, today Dow pays $8 billion a quarter.

Environmentalists and animal rights activists are obvious critics of the bill, fearing the ecological devastation off-shore drilling could cause. The US is exploring wind and solar energy alternatives, but even if America doubled its wind and solar power within the next five years, it would still only account for less than one percent the country’s energy needs.

The bill will have two more chances to pass, next Wednesday in front of the Appropriations committee, and then in front of the House of Representatives.

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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