Tapping US oil reserves will not lower gas prices, Obama says
Rising gas and oil prices tied to Middle East unrest have compelled politicians to demand that the Obama administration tap into the U.S. strategic petroleum reserve. The reaction comes despite a global surplus in oil production capacity and above-average U.S. supplies of oil and gasoline. The administration’s position is that the modest rise in gas prices isn’t enough to warrant tapping into U.S. oil reserves, which could spook international oil markets into further price increases.
Why Congress wants to tap the oil reserve
The U.S. strategic petroleum reserve, the largest in the world, contains 727 million barrels of oil, its full capacity. Nationwide, the average price of a gallon of gas has risen 28 cents in the past 10 days. Senator Jeff Bingaman, D-N.M., chairman of the Senate Energy and Natural Resources Committee, implored the administration to sell a major portion of the strategic oil reserve to stabilize oil prices and prevent a disruption in oil supplies. Other politicians are saying that in addition to tempering upward pressure on gas prices, selling some of the strategic oil reserve would raise billions of dollars for deficit reduction and help fund programs to reduce U.S. oil consumption, such as tax breaks for electric cars and hybrids.
U.S. not running short on oil
The Obama administration objects to tapping the U.S. strategic petroleum reserve as a reaction to the current spike in gas and oil prices, even though its 2012 budget proposal calls for selling $500 million worth of oil from the reserve to fund certain programs. The administration contends that tapping the oil reserve would send a false panic signal to consumers and markets when the U.S. is not running short on oil. A major oil storage facility in Oklahoma that supplies the interior U.S. has record inventories. Production is expanding in North Dakota, and a new pipeline is pumping fuel into the U.S. from Canada. U.S. crude oil inventories, according to the U.S. Energy Information Administration, are at 346.4 million barrels. U.S. gasoline inventories are at 9.86 billion gallons. Both inventories are at above-average levels for this time of year.
The solution to rising oil and gas prices
Oil industry analysts agree with the Obama administration that tapping into the strategic oil reserve now would have virtually no effect on oil and gas prices, and it would validate the fear that is driving up prices. Those who oppose tapping the reserve believe that rather than an oil supply shortage, a shortage in surplus production capacity is the real problem. Speculators are betting that spreading Middle East unrest will reduce surplus oil production capacity. If surplus oil production capacity in the future were significantly diminished, or perhaps even erased, the real oil price nightmare would begin. Adding the capacity to produce more oil, rather than a temporary infusion from the strategic oil reserve, will put the international oil markets at ease.