A well-oiled economy equals growth

By: Alfredo Ortiz

Appeared in Today's Hotelier on March 2, 2018


It’s time for America to take advantage of our domestic energy supply.

Almost every industry in the U.S. is affected by the price of oil. It’s used for transportation, manufacturing, and the production of everything from golf balls to sun glasses. It is what drives the U.S. economy, and the hotel industry is no exception.

Lower oil prices – meaning lower gasoline prices – equals more people traveling and more people staying in hotels, which is good for business. Major shifts in travel trends due to transportation costs can impact occupancy rates and a hotel’s ability to hire new people or invest in upgraded facilities. So it’s important to understand what causes gasoline prices to rise and fall.

The reason why is simple. As we learn from basic economics, the price of gasoline will fluctuate based on supply and demand.

The demand for gasoline can vary depending on seasonal trends or economic shifts. For example, more Americans travel during the summer months and thus need more fuel for road trips, pushing the price of gasoline upwards. Conversely, economic downturns can cause Americans to tighten their budgets, and the first thing to usually go is pleasure travel.

On the other hand, there are supply changes. The supply of gasoline can change for a number of reasons, but most of them depend on the production of crude oil, the raw ingredient used to make gasoline. Disturbances in its production, such as hurricanes or instability in areas like the Middle East, can cause a decrease in supply and thus an increase in price. A recent example is the destruction brought on by Hurricane Harvey last year, which brought many of the refineries in Texas to a grinding halt. The result was a short-term price jump in the market for oil.

While these factors are often difficult to control or predict, one surefire way to reduce the cost of oil, while also becoming less reliant on foreign sources, is to simply produce more of it domestically. This can be accomplished by either using traditional drilling techniques in new areas or by adopting alternative methods that are able to extract oil that was previously considered unreachable.

One example of an alternative technique would be hydraulic fracturing – more commonly referred to as fracking. In this process, a well is injected with high pressure liquid that fragments the rock, allowing trapped oil to be released. Although methods like this play a vital role in our hopes to achieve energy independence, they can be costly, making traditional drilling the preferred method for expanding oil exploration efforts.

Recent legislation – signed into law in December – creates more opportunity for these traditional methods.

The Tax Cuts and Jobs Act opened up part of the Arctic National Wildlife Refuge for oil exploration – the location otherwise known as area 1002. It’s estimated that this specific coastal region contains 10.4 billion barrels of accessible oil. Once tapped, the land is capable of producing roughly 1 million barrels on a daily basis, which could potentially account for 20 percent of U.S. oil production, according to the U.S. Geological Survey.

The move will increase the domestic supply of oil considerably, pushing the price of oil down and giving American travelers and essentially every sector of the U.S. economy a financial boost.

It’s time for America to take advantage of our domestic energy supply. That way our economic engine can roar a little louder. 

Alfredo Ortiz is the president and CEO of the Job Creators Network.