Democratic lawmakers urge Obama to tap oil reserve
Monday, March 7, 2011; 9:47 PM
Is $100-a-barrel oil a national emergency?
Some Democratic lawmakers say yes, and assert that now is the time for the United States to dip into its Strategic Petroleum Reserve, which is brimming with 727 million barrels of crude.
"We encourage you to consider utilizing the Strategic Petroleum Reserve (SPR) now," Rep. Edward J. Markey and two other House Democrats said in a letter sent to President Obama on Monday. They called the reserve "the only tool we possess which can counter supply disruptions and combat crippling price spikes in the short term."
"From my perspective, it certainly would make sense for the president to begin selling oil from the SPR," Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.) said Monday, citing soaring prices and fighting in Libya.
But the Obama administration has been noncommittal. White House chief of staff Bill Daley said on NBC's "Meet the Press" on Sunday that "we're looking at the options" but noted that past releases had happened only on "rare occasions." On Monday White House spokesman Jay Carney was even more circumspect, saying "it is an option we are considering, and again, within the broader context of the system that exists to deal with a major disruption, should that occur."
The political temptation to tap the U.S. reserve is great. The strife in Libya has taken about 1 million barrels a day of supplies off the world market and U.S. pump prices have climbed to a nationwide average of $3.51 a gallon for regular gasoline, an increase of nearly 39 cents in one month.
On Monday, the price of crude oil rose again, increasing 1 percent to $105.44 a barrel on the New York Mercantile Exchange, the highest settlement since Sept. 26, 2008. Another key benchmark, Brent crude oil, slipped 0.8 percent to $115.04 a barrel on the London-based exchange.
The U.S. reserve's stockpile is equal to 485 days of Libyan oil exports and about 60 days of total U.S. oil imports.
Even a modest release of oil from the stockpile could lower prices, some experts say. A release from the big U.S. strategic reserve could sway market psychology, though the change in prices would be hard to quantify.
"I think the main thing would be to deter those investors who think there's only upside risk on this price," said Guy Caruso of the Center for Strategic and International Studies.
In the past, some oil experts have even recommended letting the SPR function like the Federal Reserve, seeking to smooth out bumps in the markets and preventing panics without trying to alter long-term trends. It could dampen expectations and prevent hoarding.
That isn't the way the reserve was conceived. President Gerald Ford signed the Energy Policy and Conservation Act in 1975 to establish an oil reserve of up to 1 billion barrels in vast salt caverns near the Gulf Coast. The act did not set a "trigger" for tapping reserves but left the president to determine whether a drawdown would be required by "a severe energy supply interruption" or by U.S. obligations as part of the International Energy Agency (IEA).