There are very few immediate actions that government can take to stop the oil price escalator. But selling a relatively modest amount of crude oil from the U.S. Strategic Petroleum Reserve and promoting oil efficiency could pop the speculative oil price bubble and lower prices.
The United States sits on 705 million barrels of oil in the Strategic Petroleum Reserve. It was created in 1975 in the wake of the Arab oil embargo of 1973-74, and designed to provide oil in case of a catastrophic supply disruption. Since it is 97 percent full, we could easily sell a half million barrels of oil per day for 100 days without really increasing our exposure to a catastrophic oil disruption. The SPR would still be at 90 percent capacity, and we would still have nearly two months of oil on hand should all imports stop.
Selling SPR oil should not be the only immediate action to provide relief for American families. A “fuel price oilbate” program could assist low- and middle-income families with high fuel and food prices by allowing them to recoup some of the money spent on the increased cost of gasoline since 2001. Closing outrageous tax loopholes for big oil and recovering lost oil and gas royalties from the Gulf of Mexico could pay for the program. Furthermore, President Bush should urge American consumers and businesses to take a variety of steps to reduce gasoline use, save money, and lower prices.
Selling oil from the SPR, the fuel price oilbate program, and an efficiency push, could reduce prices and assist households most affected by high prices. A proposed “gas tax holiday” will not accomplish either goal. It would take money from the highway trust fund that is a crucial job-creating stimulus, and which our decaying transportation infrastructure requires.
For more information on this topic, please see:
- Bursting the Oil Bubble: Sell Oil from the Strategic Petroleum Reserve to Lower Prices by Joseph Romm and Daniel J. Weiss