Should we dip into our strategic reserves?
Posted: Mon Mar 22, 2004 12:16 pm
The following article appeared in the New York Times Op-Ed page today. I think the author makes a good point about higher fuel economy standards. I also agree that the nationâ??s reserves should be left alone right now. What do you think? Will higher fuel economy standards help? Will that raise the cost of new cars to prohibitively high levels? Should we dip into our oil reserves?
Living in GA I pay some of the lowest gas prices in the country. I canâ??t imagine what some of you in CA are paying. I am interested in what you think.
I am not addressing alternative fuels here because that was done to death in a previous thread.
Pinch at the Pump
The cost of gasoline is rising again. The average price reached $1.72 a gallon last week, just a couple pennies below the all-time record. Without a turnaround in the price of oil, which has roared to a one-year high of $38 a barrel, or a magical increase in refining capacity, prices are likely to rise higher still. This means discomfort for motorists and real pain for truckers and airlines. It also means, this being an election year, a certain amount of political grandstanding. If the Senate's initial response is any guide, Washington will choose short-term fixes over the tougher long-term solutions required.
The Senate's response to inflation at the pump was an unenthusiastic vote â?? 52 to 43 â?? to divert millions of barrels of oil earmarked for the Strategic Petroleum Reserve for sale on the open market. The House has yet to concur while the administration opposes the idea, arguing that it is more important to fulfill President Bush's post-9/11 pledge to fill the reserve to its 700 million-barrel capacity.
There's nothing inherently wrong with using the reserve to help relieve market pressures on a temporary basis â?? President Clinton tapped the reserve for about 30 million barrels in 2000 to ease a shortage of home heating oil in the Northeast. But it should be done sparingly. The main purpose of the reserve, after all, is to provide backup supply in a genuine national emergency, and a price spike is not a national emergency. If we did, for some reason, decide to use the reserve to drive down prices, it would only work at the margins and for a short time. The reserves are no match for the pricing power of oil-producing countries like Saudi Arabia. The Persian Gulf nations alone produce 900 million barrels a year, half again of what lies in the salt domes of Texas and Louisiana.
A much better way to strengthen America's leverage, as this page has suggested before, is for the United States to limit its own consumption of energy. There are many ways to do that, but the most straightforward is to raise fuel economy standards by significant amounts. This is exactly what the country did after the oil shocks of the 1970's, resulting in huge savings in imported oil.
Unfortunately, memories are short in the United States Congress. The energy bills that have passed the House and await action in the Senate not only ignore fuel economy. They also encourage the unhealthy fiction that a country that uses about one-quarter of the world's oil but owns just over 2 percent of the world's reserves can somehow drill its way out of dependency. It can't be done. Until the nation faces up to that fact, it will remain dependent on a few important producers, and its economic and strategic vulnerability will continue.
Living in GA I pay some of the lowest gas prices in the country. I canâ??t imagine what some of you in CA are paying. I am interested in what you think.
I am not addressing alternative fuels here because that was done to death in a previous thread.
Pinch at the Pump
The cost of gasoline is rising again. The average price reached $1.72 a gallon last week, just a couple pennies below the all-time record. Without a turnaround in the price of oil, which has roared to a one-year high of $38 a barrel, or a magical increase in refining capacity, prices are likely to rise higher still. This means discomfort for motorists and real pain for truckers and airlines. It also means, this being an election year, a certain amount of political grandstanding. If the Senate's initial response is any guide, Washington will choose short-term fixes over the tougher long-term solutions required.
The Senate's response to inflation at the pump was an unenthusiastic vote â?? 52 to 43 â?? to divert millions of barrels of oil earmarked for the Strategic Petroleum Reserve for sale on the open market. The House has yet to concur while the administration opposes the idea, arguing that it is more important to fulfill President Bush's post-9/11 pledge to fill the reserve to its 700 million-barrel capacity.
There's nothing inherently wrong with using the reserve to help relieve market pressures on a temporary basis â?? President Clinton tapped the reserve for about 30 million barrels in 2000 to ease a shortage of home heating oil in the Northeast. But it should be done sparingly. The main purpose of the reserve, after all, is to provide backup supply in a genuine national emergency, and a price spike is not a national emergency. If we did, for some reason, decide to use the reserve to drive down prices, it would only work at the margins and for a short time. The reserves are no match for the pricing power of oil-producing countries like Saudi Arabia. The Persian Gulf nations alone produce 900 million barrels a year, half again of what lies in the salt domes of Texas and Louisiana.
A much better way to strengthen America's leverage, as this page has suggested before, is for the United States to limit its own consumption of energy. There are many ways to do that, but the most straightforward is to raise fuel economy standards by significant amounts. This is exactly what the country did after the oil shocks of the 1970's, resulting in huge savings in imported oil.
Unfortunately, memories are short in the United States Congress. The energy bills that have passed the House and await action in the Senate not only ignore fuel economy. They also encourage the unhealthy fiction that a country that uses about one-quarter of the world's oil but owns just over 2 percent of the world's reserves can somehow drill its way out of dependency. It can't be done. Until the nation faces up to that fact, it will remain dependent on a few important producers, and its economic and strategic vulnerability will continue.
