Published January 13, 2015
A Senate lawmaker is asking President Bush to dip into the Strategic Petroleum Reserve to help keep down oil prices that are creeping up amidst a struggling U.S. economy, continuing political crisis in oil exporter Venezuela and a possible war with Iraq.
Sen. Charles Schumer, D-N.Y., wants Bush to make available 30 million to 40 million barrels of the 600 million barrels currently in the SPR to help Americans pay for skyrocketing costs of heating oil and gas.
"I think it's clear to anyone who drives or owns a home that prices are going through the roof. And Americans are being sopped with a triple whammy this winter: a soft economy, rising unemployment and now higher gasoline and heating oil and natural gas prices," said Schumer.
"With the economy as squishy soft as it is, this is the thing that could send our economy from being iffy to being a real downward slide," he said.
In 2002, gas prices soared to their highest levels in four years, according to the American Petroleum Institute. The average price last week for a gallon of gas was $1.45, 34 cents higher than last year at this time, and close to the price that is usually seen during the peak summer season.
Crude oil prices hit a record $33 per barrel last week, even though the Organization of Petroleum Exporting Countries promised last year to increase output to keep prices down around $28 per barrel.
According to Schumer, experts predict prices could rise to $35 per barrel, which would translate into 50 cents per gallon more for gas this year than at this time last year.
"The average consumer, if you drive or heat your home, is going to pay $500, $600, $700 more this year than last year. That's money that might go to get the economy going," Schumer said.
Bush has said in the past that he would not touch the Strategic Petroleum Reserve, an emergency oil supply that is maintained in case of an interruption in the supply of imported oil.
In November 2001, he ordered the reserve to be filled to its 700 million barrel capacity.
According to law, the president is the only one who can authorize dipping into the supply, which would be sold at a competitive rate on the market. In September 2000, then-President Clinton pulled out oil from the reserve as a means to prompt OPEC members to increase their output, thereby lowering prices.
The Bush administration, however, is against such price manipulation.
Schumer, who prodded Clinton for months to open the spigots, said that the president's refusal to open the SPR is a mistake.
"That's like having an ace in the hole and saying I am not going to play the card," he said, adding that it's not actually necessary for Bush to sell the oil.
"I am not asking for the president to actually use the dollars now — use the oil now. Just the fact that he is going to use it is going to inevitably bring prices down because OPEC — and the Saudis in particular — if they know that we're going to put extra oil on the market and bring the price down, they will put the oil on the market themselves. They would rather make the money than us make the money," he said.
But API experts and other economists say that the market is working as it should, and the increase in diesel and fuel oil prices is actually an indication that the U.S. economy is rebounding.
"At this point we see that the market appears to be working, we have robust production. For example, we had record levels of gasoline production, record levels of distillate production — refinery utilization was high. So it appears the system is functioning quite well, even at low levels of stock," said API's chief economist and director of policy analysis and statistics John Felmy.
Felmy and Schumer agree that a major cause of the rising oil prices is the worker strike in Venezuela, the world's fourth largest exporter of oil and a top supplier to the United States.
But whereas Schumer says the decreased production is a major problem, Felmy said new technologies will make up for the potential losses.
"It appears as though ... that refineries are able to replace Venezuelan production with other production. So we're monitoring the situation carefully," he said.
Schumer said that taking oil out of the reserves could actually have a payoff since it could be swapped out and sold at higher prices and then when prices go down, in a few months more oil could be bought at the same price, adding more to the stocks than there was originally.
Though Schumer and Felmy do not agree on drilling in the Alaska wilderness — Schumer opposes drilling in the Arctic National Wildlife Refuge — they do agree that increased oil production in Alaska won't solve the supply problem.
"It's a positive aspect for domestic production," Felmy said of the drilling. "But you know, we're working as hard to get as much oil out of the ground to consumers as we possibly can already."