Rising gas prices have democrats in congress desperately pleading for President Obama to tap into America’s Strategic Petroleum Reserve.
Massachusetts Representative Ed Markey is particularly eager for Obama to tap into the SPR as soon as possible.
In a speech delivered at a Medford gas station, Rep. Markey argued increasing fuel costs could be attributed to Iranian saber rattling, Saudi Arabian price-gougers and oil speculators on Wall Street.
Markey told constituents the SPR is to oil industries what kryptonite is to superman and the SPR should be used as a weapon to keep the American consumer protected at the pump.
Metaphors referring to the SPR as kryptonite or as a weapon are dangerous. Not only do they reinforce common misconceptions about the SPR but Markey’s oversimplification of the situation is a gross misrepresentation of what is actually causing gas prices to rise in America.
So allow me to explain why tapping into the SPR now would be an inadequate solution to a complex problem.
One, America’s SPR exists as a last resort to be used by the President to counter a severe disruption in energy supply.
The Iranian situation does not constitute such a threat, and tapping it now in order to pacify consumer discontent over higher gas prices would be nothing short of a severe overreaction by Obama and would put America in a worse situation in the long run.
Analysts predict there is only enough oil in the SPR to satisfy consumer demand for a couple of months. What happens if situations intensify overseas and America is presented with a real energy crisis? The oil that could have been used to offset the crisis temporarily would be gone and gas prices would rise astronomically.
This is because America’s SPR utilizes oil America already has; it does not infuse new oil into the markets and does not rectify a shortage problem.
Its important to understand every barrel of oil taken out of the SPR needs to be put back in. Sure tapping it now may sooth short-term volatility, but it only serves to exacerbate long-term supply insecurity, highlighting the need for America to find new and more reliable sources of energy supply.
Two, the SPR is a stockpile of crude oil; it is not a cache of refined petroleum fuel. Therefore tapping them is not a panacea for rising gas prices. Any reduction would be temporary at best and only lead to higher gas prices in the long term.
Third, it is irresponsible to make a direct correlation between Iranian threats to close the Strait of Hormuz and increased gas prices.
A reduction in refining capacity is largely responsible for the recent spike, not a crude oil shortage.
Rising costs in Brent crude combined with a 15-year low in U.S demand for gasoline has resulted in a 4 percent reduction in America’s refining capacity. The bottlenecking effect this has had on the industry has lead to a predictable increase in gas prices.
At the end of the day the increased price of gas boils down to simple supply and demand and not from a shortage in crude oil supply, despite claims to the contrary by Democrats in congress.
As an interesting side note we should all keep in mind that this is an Election year and in the last 10 US-Presidential elections no incumbent president has been reelected when gas prices were higher at the end of their term then when they began. The price of gas when Obama took office: $1.84.
Until next time,
Nate
