The Strategic Petroleum Reserve, Should We Tap It?

Posted on March 8, 2012. Filed under: Uncategorized | Tags: , , , , |

By Scott Orr

Americans are, once again, feeling the squeeze of high gas prices and, with their clout enhanced during this election year, asking their representatives in Washington what the heck they are going to do about.

Some say we need to do more drilling, or build new pipelines like the Keystone XL, or require more fuel-efficient cars, or take other steps to limit energy consumption. But none of those things will bring down the price of gasoline, at least not right away.

But there is a sure-fire way the government can bring down gas prices swiftly: it can tap the Strategic Petroleum Reserve and sell off 20 million barrels or so to increase world supplies and stabilize prices on the world market. And what better time than an election year to do something to put a few bucks back in voters’ pockets?

But what exactly is the Strategic Petroleum Reserve? The SPR was created in 1975 after oil supplies were threatened during the Arab oil embargo to insure against supply disruption. Maintained by the Department of Energy, the SPR currently consists of approximately 727 million barrels of oil stored deep below the earth in artificial caverns at four sites along the Gulf of Mexico. That’s enough oil to meet U.S. oil consumption needs for 34 days.

President Obama tapped into the reserve last June, when the Arab Spring revolution sparked fears about oil supply instability. The price of gasoline quickly dropped about 8 cents per gallon, but then bounced back.

The administration of Bush W. Bush sold off 11 million barrels in the wake of Hurricane Katrina, when Gulf oil supplies were threatened. His dad sold 17 million during the first Gulf War. Congress authorized the sale of 28 million barrels in 1996 for deficit reduction.

If Obama were to sell off SPR oil now, it would be seen as an election year ploy and it probably would be. Still backers of a sale say it could offset instability caused by a decline in Libyan production or disruption in supplies caused by Iran. The reserve would still be 90 percent full after a modest sell off, they argue.

Opponents say the reserve is meant for emergencies, and Obama’s reelection is no emergency.

Is gasoline at $4.50 per gallon an emergency? How about $5? Maybe, maybe not, but if an increase of that magnitude were to threaten America’s economic recovery an argument could be made that a sale is warranted even if it looks like crass political brinksmanship.

Still it seems unlikely Obama would act without a really good reason, like an Iranian blockade of the Strait of Hormuz which could cause a global oil crisis among other serious problems.

Having all that oil stored underground should be a solid comfort for Americans, which, after all, is its purpose. We hope the President will not tap it for short-term political gain.


Turner GPA is a leading D.C.-based national lobbying and government affairs firm dedicated to delivering cutting edge policy advocacy for the manufacturing, defense, aerospace, health and energy industries. Members of our professional policy team can be reached at (202) 466-2511. We are also on the Web at www.turnergpa.com.

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One Response to “The Strategic Petroleum Reserve, Should We Tap It?”

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In a nation of drivers who might think little of burning a gallon of gas to solve a craving for burger and fries, beer, or a cigarette; there is plenty of room for measures short of tapping our reserves. It would be interesting to see if prices drop if each driver saved 1 gallon per week– that is eliminate on trip that might otherwise have been done– like doing groceries and beer in one trip rather than two, or busing to work on day per week. It would be interesting to see what reduced demand would do to prices, my guess is that it is the certain way to reduce the price at the pump and clearly save by using less fuel…at any price. Howard Moore and the Moore Consulting Group
http://www.hmooreconsult.com


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