A hollow gesture
Action on petroleum reserve is of minimal benefit to consumers
Rocky Mountain News
Published May 15, 2008 at 12:05 a.m.
Congress has taken an ineffectual step toward curbing gasoline prices. This week it directed President Bush to suspend filling the Strategic Petroleum Reserve. That the gesture was mostly public relations is evidenced by the lopsided vote, 97-1 in the Senate and 385-25 in the House. (The lone dissenting senator, Colorado's Wayne Allard, is retiring this fall - although Allard is probably just ornery enough to have voted against it even if he had been up for re-election.)
President Bush opposed the legislation, but he's not running for re-election. Most lawmakers of course are, and they felt under pressure to do something, anything, about gasoline prices even if it's almost wholly symbolic, as this is.
During the 1973-74 Arab oil embargo, the government designated a network of salt caverns on the Gulf Coast as a strategic reserve. It currently holds just over 700 million barrels of oil - about a two months' supply - and is 97 percent full.
The reserve was created to respond to major disruptions in supply, not to control price fluctuations. The example Bush likes to use is an al-Qaida attack on a major U.S. oil facility.
But as for prices, as the president also points out, the 70,000 barrels a day being pumped into the caverns are less than one-tenth of 1 percent of the 85 million barrels the world consumes each day.
Don't misunderstand: It makes sense for the government to stop or slow buying when oil prices are high and resume when they begin to fall, just in order to save itself money. But given nearly $4-a-gallon gasoline, any savings a motorist would see because of such a moratorium are likely to be negligible. The administration estimates maybe 5 cents a gallon at most. The Democrats project a less plausible savings of 24 cents.
Even if true, of course, those savings could be quickly gobbled up by further price increases.
As energy policy, the vote on the reserve doesn't mean much, but the number of Republicans willing to desert the president speaks volumes about his fast declining clout with Congress.
If Congress really wanted to do something to add to long-term oil supplies, it would authorize additional exploration on the Outer Continental Shelf (we won't even bring up the subject of northern Alaska). But of course that would amount to meaningful action - and why do that when an empty gesture is within its reach?
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May 15, 2008
7:19 a.m.
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dilligaf writes:
I predicted that when Bush didn't get his way to allow his oil buddies to drill in Alaska he would find a way to twist the arm of the American people. That is what the gas prices is all about.
May 15, 2008
7:32 a.m.
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thats_just_me writes:
Dilligaf - so you are saying that President Bush goes to the oil companies and tells them what to charge?
May 15, 2008
7:40 a.m.
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StraightTalk writes:
The amount of oil currently put in the strategic reserve daily amounts to 0.33% of U.S. daily oil consumption. I don't know how to calculate the effect that'll have on the price of oil-per-barrel, but I doubt that it will be very much. Next you have to refine the oil into gasoline. I think a 5 cents-per-gallon reduction is very optimistic.
If you really want to reduce the price-at-the-pump, we all need to reduce (significantly) the amount of gasoline used daily (the article in today's Rocky about increased numbers of riders using mass transit is encouraging). In spite of the conspiracy theories that rely on fiction, gasoline (and crude oil) prices are based largely on the laws of supply and demand.
Which brings me to the other way to reduce the price of oil - produce more. If you don't want the U.S. to produce more oil, then don't complain about the price of gas.
And by the way, you can't tax, sue or investigate your way out of this problem.
May 15, 2008
8:27 a.m.
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dilligaf writes:
thats_just_me,
The power of our government can do a lot of things to dictate the way our economy works. Wars and dealings with overseas countries. Daddy Bush and W has have very strong business back ground with the Saudis. With out giving me this BS about supply and demand could you please explain how the barrel of oil has gone from $35 to $120+ in just 7 years? And with two oil men running this country. We have always had supply and demand. And if this isn't the case another thing just happened to fall in Bushes lap. Just like 9/11 fell in his lap for a reason for going to war with Iraq.
May 15, 2008
8:29 a.m.
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mytwosense writes:
thats_just_me: "Dilligaf - so you are saying that President Bush goes to the oil companies and tells them what to charge?"
I assume this is another twist on the "Presidents don't have any effect on oil prices" argument.
If that's the case, then why did Bush huff and puff back in 1999 that he would "jawbone OPEC" to make them increase supply if he was president? Also, why does he meet with the Saudi royals under the pretext of "asking them to increase production" (I love how the strutting little bantam rooster changed his wording from "jawboning" to "asking")?
Presumably because US presidents as leaders of OPEC's biggest customer, the US, DO have influence over supply which effects price.
Not surprisingly, Bush has failed at this, too.
May 15, 2008
11:07 a.m.
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anarchist writes:
Richard M. Nixon caused the 1973-74 oil embargo?
May 15, 2008
12:31 p.m.
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dilligaf writes:
SASQUATCH,
Come talk to me when Pelosi and Reid get that republican in the white house out of their way.
May 15, 2008
12:38 p.m.
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jay writes:
bigfoot....are you still trying to lay the blame republican failures at the feet of the dems?
when did accountability become a four letter word in the republican ranks?
speaking of incompetence....clinton was able to increase opec production and have a far greater effect on gas prices simply by threatening to leverage the nation's oil reserves. why hasn't bush been able/willing to do the same?
May 15, 2008
1:34 p.m.
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jay writes:
bigfoot are you really unaware that clinton was successful in leveraging our oil reserves to force opec's hand or is this another example far right wing willful ignorance?
May 15, 2008
2:23 p.m.
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NotYours writes:
Yet another reminder to the screaming haters that oil prices are set BY THE MARKETS via commodity traders and speculators. The OPEC cartel sets international production levels by committee, by telling oil companies how much they can pump out of the ground on any given day.
The USA carries far less influence with OPEC in the new century since there are many other rapidly growing countries who are increasing their oil purchases like never before. Get used to the prices. They're only going to get worse -- no matter who's "president".
May 15, 2008
3 p.m.
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dilligaf writes:
SASQUATCH,
You and Earl must be ranch hands that never came out of the third grade. Your stupid babbling is practically the same.
May 15, 2008
3:02 p.m.
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jay writes:
notyours, do you think that insability in the middle east has any effect on global gas prices?
May 16, 2008
8:04 a.m.
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anarchist writes:
dilligaf posted in part "SASQUATCH,
Come talk to me when Pelosi and Reid get that republican in the white house out of their way." Its My position that by that time comrade Pelosi et al will have driven the price of gas up so it wouldnt be economically feasable for that meeting. Ranch hands that never graduated the third grade, sounds like when you are losing a debate about the wonderous comrade pelosi you resort to infantile name calling like a good little democrat. As for jay wanting oil leveraged, that could happen if we could tap the untapped reserves that the democrats are so zealously guarding.
Not Yours I think has it right, prices are set by the market and production is set by OPEC, not the sitting president.
May 16, 2008
4:05 p.m.
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MrPeabody writes:
Thank you NotYours. Finally, somebody that understands basic economics, unlike our current Congress. You stated it succinctly, as well. Not that those currently suffering from BDS will pay the least attention to facts.....