The United States Strategic Petroleum Reserve was created in 1975 in the wake of the 1973 OPEC oil embargo to help the United States buffer against oil price shocks that have “major adverse impact on national safety or the national economy.” With oil hitting $147/barrel last week and American families struggling with gas prices over $4.00/gallon, we believe the time for a buffer is now.
This week, in the Center for American Progress Action fund advocated releasing half a million barrels of oil from the reserves per day for 100 days. This increase in the oil supply would bring prices down, pop the speculative bubble, and raise money to pay for relief for struggling American families.
This sale would require using a mere 50 million barrels from the record 708 million barrels currently in the reserves. This would leave 90% of the reserves intact, enough to power the entire U.S. economy for two months without oil imports (an extraordinarily unlikely scenario as over 1/3 of our imported oil comes from Canada and Mexico).
To illustrate the power of releasing oil from the reserves, check out these two graphs illustrating oil prices in the wake of the 1991 release during Operation Desert Storm and the 2005 release in the wake of Hurricane Katrina.
Operation Desert Storm: On January 16, 1991, President George H.W. Bush announced the release of 34 million barrels of oil to stabilize oil prices during Operation Desert Storm. That day, oil sold for $32.25 a barrel. The day after the announcement, prices dropped 33.4%, one of the largest one-day drops in the history of recorded oil prices, to $21.48/barrel. In conjunction with the release of oil reserves in nations across the OECD, prices stayed low, averaging $19.46/barrel in February and $15.50/barrel in March.
Hurricane Katrina: Oil prices were rising as Hurricane Katrina bore down onto the Gulf Coast in late August 2005. By September 1st, after the storm made land-fall and wrecked key oil infrastructure in the gulf, prices had risen to $69.50/barrel, well above the August average of $65.58/barrel. On September 2nd, President George W. Bush authorized the release of 30 million barrels of crude oil from the reserves. The price dropped 3.7% that day, and stayed low throughout the aftermath of the storm, averaging $62.26 in October and $58.32 in November.
Releasing oil from the Strategic Oil Reserves could provide serious price relief for American families struggling with skyrocketing gas prices and raise revenue to invest in a new energy future without padding the profits of big oil companies or putting our nation at risk. President Bush has the authority to release this oil today, and it could be on the market in two weeks. He should consider it.