Hands Off Our Oil Reserves

March 6th, 2011 at 7:22 pm | 13 Comments |

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Democrats in Congress are clamoring for President Obama to open the stopcocks at the Strategic Petroleum Reserve and let the crude splash into the market in order to drive down pump prices.  It’s a bad idea, for three reasons.

One, the reserve squirreled away in Gulf Coast salt caverns is intended for truly dire energy emergencies. Doing what the Democrats are asking would be like a family raiding its emergency savings account to cover an increase in gasoline prices.

Second, if oil were taken out of the reserve, the withdrawn amount would have to be replaced, probably at higher prices than we paid for stocking the oil in the first place. That’s a bad deal for taxpayers.

Third, taking oil from the reserve would give credence to the notion that there’s nothing wrong with being addicted to oil as long as the liquor cabinet is full when we belly up to the bar for our regular fix.

Since oil markets are prone to charging fear premiums whenever there’s tumult in oil exporting places, then the oil markets are trying to tell us something – conserve now and start thinking rationally about our energy future now, rather than waiting for the good-to-the-last-drop crowd on the Hill to at last wise up.

Breaking our oil addiction will take time, political will, and a balanced energy strategy based on facts, not on ideological hobbyhorses. That baggage should be checked at the door, including the Right’s drill-baby-drill sloganeering and the Left’s utopian fantasies.

Few in D.C. want to talk about it in rational terms these days, but a price on carbon should be the centerpiece of a strategy for weaning the U.S. off oil and giving alternative transportation fuels and drive systems a shot at breaking the petroleum monopoly.

Otherwise, our economy and security will be at the mercy of the next petro-potentate whose people start shooting at him.


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13 Comments so far ↓

  • jerseychix

    No no no no no. Bingaman is 100% wrong.

    Let the price rise. Let the market work. Really, I am ok with $4/gallon. And then, when prices start to come down, implement a tax to keep gas prices AT $4/gallon so we stop sending money to people who hate us.

    Maybe then we will break our addiction.

  • TerryF98

    There is no supply problem at all. The same amount of oil is shipping as when the price was $3.50 a gallon.

    The issue is speculation, take out the speculators and you cure the problem. There should be no speculation on Oil as it is the life blood of the economy.

    • Nanotek

      “The issue is speculation, take out the speculators and you cure the problem.”

      exactly … but they operate unseen from the most of us … anyway to ID them Terry?

  • JeninCT

    Few in D.C. want to talk about it in rational terms these days.

    This applies to pretty much every problem we face as a nation.

  • sunroof

    If oil guru Jeffrey Rubin is right, oil is going to $200 a barrel by 2012. So deal with it America. For 40 years now, you have been paying lip service to beating the addiction. The Saudis have falsified their reserves, the North Sea and Mexican offshore fields are depleting. Oil states like Iraq and Venezuela run by internationally isolated murderers and crackpots can’t upgrade their drilling and refining capacity to tap their full reserves.

    • ottovbvs

      In the long run he may be right, but when will this be? 2050? It certainly won’t go to $200 in the next five years unless Bin Laden takes over in Saudi Arabia, or Israel attacks Iran, or some similar cataclysmic event occurs. In fact if Ghadaffi was removed tomorrow it would probably go back to the low 90′s in short order. Given that Libya produces only 2% of the world’s oil and is the only regime where oil shipments have been seriously impaired there seems to be some over reaction here. Some of the run up in oil prices is obviously based on demand increases from emerging markets but without the middle eastern turmoil where would the price be? Probably in the 80′s. Which leads to the next question is there really the threat of a major disruption of oil supplies right now? Not really

  • John Frodo

    The SPR at $100 has a value of $72 Billion, use this value to first burn the speculators by releasing oil to bleed the 25% of of the value, and secondly to build an infrastructural of hydrogen refilling stations along the freeways. Then you dont need the SPR, you dont care if the Saudi King is backstabbing you. Be like Cortz, eliminate any chance of going back or in America’s case face the future now.

  • balconesfault

    Second, if oil were taken out of the reserve, the withdrawn amount would have to be replaced, probably at higher prices than we paid for stocking the oil in the first place. That’s a bad deal for taxpayers.

    While it’s a sidebar to the larger discussion, the price that was originally paid for the oil is irrelevant to the economics of using some of the oil now.

    The only prices that matter to the discussion is what it could be sold for on today’s market, and what it would cost to replace it. If the oil was originally purchased at $140 or $20/bbl is not a factor – a “sunk cost” in the figurative as well as literal sense of the term.

  • Tempest in a Frumpot

    I am of 2 minds on this, if you believe that the rebels will win in Libya then production will likely greatly increase in Libya and prices will come down, hence releasing some oil now will calm nerves down. If you feel the earthshake you get out of the house because you never know how big it is going to get. If it ends up being small, then no harm is done. If it ends up tearing down the house, then it would meet the emergency conditions.
    The reason I am of two minds on this is this might be a very minor tremor, we release some oil but a few months from now comes the big one (rebellion in Saudi Arabia) while I think the chances of this are slim at best I would have said the same thing about Gadhafi being overthrown.

  • PracticalGirl

    As Terry already said, no supply problem here. We tapped our oil reserves during the Katrina disaster. Prices went down a whopping 3%. Tapping them again during a price crunch absent supply problems does nothing for America or Americans other than allow us to turn away from the real issue of developing renewable energy sources.

    Millennials- all those wasted college educations can be put to use right here, right now. Get on this now, because you’re about to be stuck with the biggest problem the Boomers could ever leave you.

  • Nanotek

    “Millennials- all those wasted college educations can be put to use right here, right now. Get on this now, because you’re about to be stuck with the biggest problem the Boomers could ever leave you.”

    unfortunately, I’m sorry to say we’ve left you worse, PracticalGirl … the climate is heating, the oceans are a chemical brew, along with sporting the Great Pacific Garbage Patch, and try to avoid the lethal air drifting from over China. But the real challenge for your generation may be yet to come … when cognitive technologies exceed human intelligence

  • Tempest in a Frumpot

    Nanotek, my what a cheery post, excuse me while I go slit my wrists after reading that. And I hate to tell you cognitive technologies have already exceeded some forms of human intelligence. I guarantee you that my toaster is smarter than Sarah Palin.