Democrats are ramping up political pressure on President Obama to sell off part of the nation's crude oil stockpile to alleviate soaring fuel costs, but critics of the move say it wouldn't have a long-term effect on prices at the pump.
Calls to tap the nation's 727-million-barrel Strategic Petroleum Reserve were buoyed significantly last week when Sen. Jeff Bingaman (D-N.M.), chairman of the Senate Energy and Natural Resources Committee and one of Congress's most pragmatic voices on energy policy, pitched 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 last week (E&E Daily, March 3).
And the White House indicated this weekend that it is considering such a move.
"We're looking at the options," said White House chief of staff William Daley Sunday 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."
Crude oil prices have skyrocketed in recent weeks as political unrest first in Egypt and now in Libya have unsettled global energy markets. As a result, gasoline prices have risen 34 cents in two weeks. Bingaman and other backers of an SPR release say a sale would calm 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 last week. He added last night, "I think it's very good that they are considering it, and I hope that they conclude that it makes some sense."
But opponents of the idea say the government should focus on long-term solutions rather than a short-term price fix. "I think it's just an awful idea; it doesn't solve the problem," said Bob Cavnar, a 30-year oil industry veteran who is now CEO of Luca Technologies, a company that produces natural gas from depleted fields.
Cavnar and other opponents of tapping the reserve say a drawdown now would leave the United States vulnerable to other supply disruptions like hurricanes, embargoes or cutbacks from the Organization of Petroleum Exporting Countries.
"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-N.C.) told reporters last night in the Capitol. "We haven't gotten an interruption today, so I think it would be ill-advised to open it up."
Economists say 'no'
The oil industry, too, is opposed to a sale.
"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.
Other economists tend to agree. Mark Zandi, an economist with Moody's, told CBS News that a decision to open the SPR would be "premature."
"I don't think it is going to make a big difference with respect to prices, and at this point, we can digest these prices," Zandi said.
Felmy cautioned lawmakers calling for an SPR release to look at how such actions have fared in the past. Since the stockpile was first created in the 1970s after an OPEC export embargo, it has been used only a handful of times, including during the first Persian Gulf war and after Hurricane Katrina shut down Gulf of Mexico oil production in 2005.
But a 2000 release during the Clinton administration "is probably the most instructive," Felmy said. "It wasn't a real emergency such as a hurricane or natural disaster."
The 30-million-barrel swap in late 2000 did have an immediate impact on oil prices, but a few months later, OPEC cut output by 43 million barrels and "effectively trumped the release," Felmy added.
"Therein lies one of the key questions: What has this administration done in terms of discussions with OPEC?" Felmy asked.
"All things equal, a release can lead to lower prices," he added. But "the last thing we want to see is a release and then an output cut."
But congressional Democrats say an SPR sale would send a strong long-term signal.
"Releasing even a small fraction of that oil could have a significant impact on speculation in the marketplace and on prices," Reps. Ed Markey (D-Mass.), Peter Welch (D-Vt.) and Rosa DeLauro (D-Conn.) wrote yesterday 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."
And Bingaman said last night that calming current oil markets is "the important thing."
During his speech last week, Bingaman brought up some SPR history of his own, touting the Reagan administration's policy on releases.
"In testimony before the Committee on Energy and Natural Resources on Jan. 30, 1984, President Reagan's Secretary of Energy, Donald Hodel, stated that the administration's SPR policy in the event of an oil supply disruption was to 'go for an early and immediately drawdown,'" Bingaman said.
The Democrats also are pushing for long-term investments and movement toward low-carbon energy sources. But an SPR sale would help ease the current situation, they say.
"The SPR would be used to send a strong signal to oil markets that the U.S. would not allow a physical oil shortage to develop," Bingaman said.
Republicans, on the other hand, argue the situation makes a case for expanded domestic drilling.
"If they're looking at that," Sen. Mike Lee (R-Utah) said of opening the SPR, "I hope they're looking at" opening the Arctic National Wildlife Refuge to oil drilling as well.
And Robert Dillon, a spokesman for Sen. Lisa Murkowski (R-Alaska), ranking member of the Energy and Natural Resources Committee, said, "They want to raid the piggy bank, but they don't want to actually roll up their sleeves and produce the resources we have at home."
But the SPR debate is not completely divided along partisan lines.
"I'm not sure I would totally agree with that," Sen. Mark Begich (D-Alaska) said last week of the calls for an SPR sale, "but I wouldn't necessarily close the door on it. You know what I would say, if we would just get on with doing what we need to do in Alaska, and we would not delay the opportunity for oil and gas exploration there, we wouldn't have to."
Reporters Elana Schor and Phil Taylor contributed.