Idea of the Day: Selling Reserve Oil Will Bring Down Gas Prices

February 23, 2012

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Americans are rightly concerned about rising oil and gasoline prices. On February 21 oil closed at $106 per barrel, while the average gallon of gas in the United States cost $3.59. Bloomberg reports that prices could continue to rise:

While gas prices tend to rise through the first half of the year, this is the earliest the average price per gallon has breached the $3.50 mark. If this pace continues, the national average should hit $4 a gallon by May, if not sooner.

This is not good news for consumers or for the economy. High oil and gasoline prices slow economic growth and take a real toll on families’ already-strained budgets. They are difficult to lower in the short run because it is very hard to promptly increase oil supplies. Meanwhile, demand for gasoline does not decrease even as prices increase because most people cannot quickly and significantly reduce the amount they drive.

There is one proven tool for temporary reductions in oil and gasoline prices that can forestall reduced economic growth and help middle-class families: selling oil reserves from the Strategic Petroleum Reserve.

President Barack Obama plans to speak about high oil and gasoline prices today in Florida. He will remind Americans that oil production is up and consumption is down, which means that families are saving money on fewer gasoline purchases even though prices are rising. The payroll tax cut extension will provide an average of $40 more per paycheck and will also help ease some of the strain of higher gasoline prices. It is unlikely the president will announce the sale of reserve oil during the speech, but it remains an option if prices continue to climb.

For more on this topic, please see:

• Time for the Oil Reserves? by Daniel J. Weiss