The Debate Over Tapping Oil Reserves

Critics maintain tapping the SPR is not a long-term fix.

March 10, 2011

NEW YORK - A New York Times article earlier this week examined the effect that tapping into the nation??s crude oil stockpile would have on rising gasoline prices.

While Democrats have been lobbying President Obama to sell off part of the nation??s 727-million barrel Strategic Petroleum Reserve (SPR) to alleviate high gasoline costs, critics maintain the move would have a negligible effect on long-term gasoline prices.

Last week, Senator Jeff Bingaman (D-NM), chair of the Senate Energy and natural Resources Committee, advanced the idea during a floor speech.

"I believe that it would be appropriate for the president to be ready to consider a release of oil from our Strategic Petroleum Reserve if the situation in Libya deteriorates further," Bingaman said.

This past weekend, the White House indicated it was considering Binaman??s suggestion.

"We're looking at the options," said White House chief of staff William Daley on 'Meet the Press.?? "I think...all matters have to be on the table when you...see the difficulty coming out of this economic crisis we're in and the fragility of it."

Oil prices have risen sharply in recent weeks, with gasoline prices increasing 34 cents in the past two weeks. Bingaman and his backers maintain an SPR release would settle the markets.

"While I do not think that high oil prices alone are a sufficient justification for tapping the SPR, I do believe that the announcement of an SPR sale would help to moderate escalating prices," Bingaman said.

However, opponents recommend focusing on a long-term solution rather than a short-term price fix. "I think it's just an awful idea; it doesn't solve the problem," said Bob Cavnar, CEO of Luca Technologies, a company that produces natural gas from depleted fields.

Cavnar and others maintain that tapping the reserve would leave the United States vulnerable to other supply disruptions, such as those caused by hurricanes, embargoes, or cutbacks from OPEC.

"It was never designed to be a facility used to stabilize gas prices; it was always a reserve for any interruption in the supply," Sen. Richard Burr (R-NC) said. "We haven't gotten an interruption today, so I think it would be ill-advised to open it up."

The American Petroleum Institute opposes an SPR sale, too.

"Our position has been parallel with the original intent of the SPR, that it's for an emergency ?" a hurricane or embargo with very clear physical impacts, not price," said John Felmy, chief economist at the American Petroleum Institute (API). "Therein lies one of the key questions: What has this administration done in terms of discussions with OPEC?" Felmy asked.

However, congressional Democrats say an SPR sale would effect long-term pricing, as it would send a strong signal to oil producing countries.

"Releasing even a small fraction of that oil could have a significant impact on speculation in the marketplace and on prices," said Reps. Ed Markey (D-MA), Peter Welch (D-VT) and Rosa DeLauro (D-CT) in a letter to President Obama. "It would also remind the world that the U.S. is ready, willing and able to use the SPR aggressively and effectively if needed."

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