Due to differences in factors such as the minimum wage, wouldn't eliminating foreign oil raise the cost of gas

Question

I had a friend of mine explain this to me at one point several years ago and due to the price of gas currently, I've given it thought once again and I'm wondering if it makes sense to anybody.

Due to the cost of drilling, refining, and producing oil domestically vs. internationally, it is actually in the financial intrest of american consumers for the United States to continue relying on foreign oil.

The main issue of cost has to deal with employees, specifically wages and benenifits. In the US, Federal Minimum wage is $ 6.55 per hour. Assuming a 40 hour work week, this equates to roughly $1,048.00 before taxes. In Saudi Arabia, there is no oficial minimum wage, however the U.S. State Dept. estimates it unnoficially to be around 1500 riyals ($400) per month (based on minimum required monthly contributions to the pension system) for Saudi Citizens, and non-existant for foreign workers. This is similar for many other countries in the Middle East. As a result, the oil companies can pay less to workers in the Middle East, than those who do the same work in the United States.

To me this somewhat makes sense with the exception of one major flaw: This theory relies on the belief that the oil company's savings from off shore production are in turn passed on to the consumer, as opposed to being kept in their coffers.

Answer 1

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Answer 2

Yes, buying foreign oil is indeed more efficient than producing it ourselves.

This is a political issue more than anything else.

Americans don't like hearing that we import oil from the Middle-East.  They'd rather hear that we're brewing it in our own backyards.  People in politics tell the people what they want to hear so they can get elected.

In the end, we're left with a dumb electorate.

Also, minimum wage is only one of the very small factors in determining the cost efficiency of oil.  Oil in the Middle-East is more pure and more easily refinable as oppposed to our plentiful domestic crude oil, which is more expensive to refine.

Answer 3

The world price of oil far exceeds production costs of any oil currently being produced. The cost of production varies  mostly due to the technical difficulty  of getting the oil, not the wages paid. It just cost less to pump oil in a desert than  pumping from an oil platform in the ocean. The reason we import 70 percent of our oil is that oil must be drilled for where it exist in the ground, and the US does not have much left unless we decide to  use oil shale which would be very costly oil,

Answer 4

Oil is a global commodity. The selling price is set by traders all over the world. So what we pay for oil is not based on the cost to pump it.

Oil that can be brought to market under the selling price will be brought to market, that which cannot be, will not be.