Rising Oil Prices: A Solution in the SPR?

Wednesday, August 10, 2005

Oil prices are increasing, winter is looming, and President Bush's energy bill does not address U.S. dependence on oil, or gas and oil prices. What can be done? My suggestion is for Bush to sell off some of our oil reserves.

The Strategic Petroleum Reserve (SPR) was created in 1975 as a result of the 1973 energy crisis. The program was built on tax dollars and set up to prevent another economic crisis, and to have some leverage against OPEC. The SPR has a total capacity of 700 million barrels of oil. Since 2001 it has been receiving about 160,000 barrels a day, delivered to the U.S. on a "royalty-in-kind" program. This, in essence, is free oil. It comes from companies who acquire leases on the federally-owned Outer Continetal Shelf in the Gulf of Mexico. As of August 2005, the SPR was 99% full, and the Bush administrations stance on the reserve is that it is not to be touched.

On January 17, 1991, President Bush I announced that the U.S. Energy Department would sell as much as 2.5 million barrels of oil a day from the stockpile. As a result of this announcement (the U.S. did not sell that amount), oil prices around the world fell. Just the thought that the U.S. was going to flood the market with more oil was enough for the world market and OPEC to reduce oil prices.

Here we are again. Whether it's the war, civil rights, the economy, or the nation's energy, President Bush continues his one way street mentality of always taking and never giving. Why do we need 700 million barrels of oil on reserve? The whole program was set up on the American taxpayers money, and even worse the government has been receiving the oil free for the last 4 years. They owe us! Much like his father, all Bush has to do is just tell the world that the U.S. is considering releasing oil from the SPR and prices would fall back in line. Ah, but there is the ever present problem: Bush and the administration are friends of oil companies. Why would they want to help the average American when Bush and Cheney can fatten the pockets of thier oil buddies?


Anonymous said...

I live in Alberta and although we have lots of oil and gas being produced here we still pay market price regardless if the processing plant is 6km away. It sucks, but what better price to pay for suburban living than gas taxes.

You need oil in reserve for that inevitable rainy day, when oil is scarce, and you still want to go to the grocery store because you haven't grown a garden that can sustain you and your family from year to oiless year. I hope that when it comes to that "average" americans will benifit from the big brains of Texas oilmen. But hey who are we kidding. Vie va la urban sprawl!

wildcat9two said...

get used to it.. wont be going down anytime soon.


jj said...

The energy bill not only give taax payer money to oil companies (that are making record profit by the way) it does nothing to help the US get of foriegn oil.

mileage standards would be nice and much less PORK.

Jay Denari said...

At best, using the SPR would be a short-term band-aid. It might prompt OPEC to reduce prices, but I don't think the currently spiraling costs has much to do with a decrease in oil availability per se. Most of it is probably what could be dubbed a "fear tax" imposed as a result of the Iraq war and various acts of terrorism real or imagined.

It's quite likely that oil supplies are indeed dwindling; anyone with common sense knows it's a finite resource. But average Americans won't wake up to a need to conserve, find other energy sources, or use public transit until either the government gets more progressive and starts promoting decent science-based policy or gas prices start approaching the $4 or $5 mark. The latter will certainly happen (my guess is in early 2008), but we'll need to work for the former.

If Bush actually taps the SPR, it'll be as a political stunt, not as a serious effort to reduce prices.

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