Discuss as:

What cutting oil dependency could mean at the pump

From NBC's Jason Seher
In his speech at Georgetown University earlier today, President Obama outlined his vision for the future of American energy policy, emphasizing increasing vehicle efficiency standards and mining sources of alternative energy. Obama echoed promises he made on the campaign trail and since he's taken, touting American production of advanced electronic car batteries and job creating alternative energy programs.

These promises emanated from Mr. Obama's pledge to end -- or at least lessen -- the United States' dependence on foreign oil. Citing both the "dangers" of oil dependency and his predecessors’ inability to curb America's demand for foreign oil, the president pledged to "cut our oil dependence by a third" in 10 years. 

But what would that mean for American oil production and how would this cut impact gas prices?

"If everything else stood still, it could be big," said Amy Myers Jaffe, a fellow at the James A. Baker Institute for Public Policy at Rice University. "It could lower the price of oil to maybe $50 or $40 a barrel."

Co-author of "Oil, Dollars, Debt and Crises: The Global Curse of Black Gold," Jaffe believes oil from North Dakota's Bakken Shale and continued deepwater drilling could increase domestic oil production three- or four-million barrels a day, enough to push oil prices below $50 a barrel, assuming the geopolitical climate stays relatively stagnant.  

The last time oil dipped below $50 a barrel was Nov. 20, 2008, a few weeks after President Obama's election. For the week of Nov. 24, 2008, the U.S. Energy Information Administration reported a gallon of regular cost an average of $1.86. 

But Jaffe and others caution a number of factors, including political volatility in the Middle East and oil powers like OPEC, could blunt the impact this increase in domestic oil production would have.

“This plan is unlikely to affect the price that families pay at the pump," said Michael Greenstone, former chief economist for the White House's Council of Economic Advisors. "Even with enhanced production, the United States will account for a small share of what is a world market for petroleum." 

President Obama did temper his calls in today's speech for cutting dependency, acknowledging America only holds about 2 percent of the world's proven oil reserves.