Gas prices have been rising quickly in the past couple of weeks, and it has a lot of people concerned. With the unrest in Libya adding fuel to the fire, there might be a way to lower gas prices even if it is not a popular option.
CNN reports that White House Chief of Staff William Daley hinted on “Meet the Press” Sunday the government is considering dipping into the United States’ Strategic Petroleum Reserves. This potential option to dip into the reserve comes in light of soaring gas prices that are partially due to the unrest in Libya. Tapping into the reserves is always an option and it could help force the price of gasoline to go down, but the issue is very heated. Democratic Senator Jay Rockefeller of West Virginia is a supporter of the idea and Republican Senator Lamar Alexander opposes it, according to Yahoo! News.
It is debatable whether or not the unrest in Libya has created enough uncertainty in the oil markets to consider it a crisis. The reserve supply has only been tapped into a handful of times since its inception in the 1970s. Bloomberg reports that the last time the Strategic Petroleum Reserves were tapped into was after Hurricane Katrina in 2005. Katrina rattled the Gulf of Mexico and shutdown many of the oil rigs and refineries within the area. This led gas prices to soar across the United States; the price per barrel to increase above $70. A shortage was also feared since the Gulf of Mexico held about 30 percent of the oil production. Former President George W. Bush ordered the release of 20 million barrels of oil from the reserves, which immediately affected the stock market. Within a couple hours after the announcement, the crude oil prices began to drop and it lowered the prices at the gas pumps.
Given this information and the fact that the Strategic Petroleum Reserves have only been tapped into a handful of times, it will not affect America’s oil future. Dipping into the reserves seems likely to lower prices we are paying at the pump, since it can help ease unrest and fear. The Strategic Petroleum Reserves hold over 600 million barrels of oil currently, so if we tap into it and take out 30 million, there will still be a lot left. Tapping into the oil reserves will not give us an oil shortage in the future because we would only have to take out what is comparable to our needs.
For example, when Bush tapped into it in 2005, he took out about the same amount that was being lost from the shutdown of the Gulf of Mexico refineries and rigs. This lowered the price of gasoline and helped ease the potential fear of an oil shortage, and did not harm our fuel future at all. As long as we only use the Strategic Petroleum Reserves for an emergency, we will have enough oil to last for a long time.
Are we currently in an oil emergency and shortage, or are we just scared of that possibility? Those are the questions that Obama will have to answer, since he has the power to determine when such an emergency occurs. When Bush tapped into it after Katrina, it was because there were many oil refineries that became useless due to the hurricane, so it was understandable because that was a real issue we could see. Right now however, it is hard to determine whether or not there is a real threat of an oil shortage. Either way, it does not seem like it will negatively affect our oil production or energy future. If the prices at the pump decrease, then it will help the stock markets rebound from the unrest in Libya and it could strengthen the weak economic recovery in America.
Paul R. La Monica, “Tap the Strategic Petroleum Reserve? Why?”, CNN
Jackie Frank and Lewis Krauskopf, “U.S. keeps oil reserves options open as gasoline surges”, Yahoo! News
Jim Efstathiou Jr, “U.S. Taps Emergency Oil Reserve as Prices Surge (Update6)”, Bloomberg
Daniel Patrascu, “US Looking to Use Strategic Oil Reserves”, Auto Evolution
Suburban Emergency Management Project, “Strategic Petroleum Reserve Status Post Hurricane Katrina”