Today at 9:15 am is the Select Committee on Energy Independence and Global Warming hearing, “Immediate Relief from High Oil Prices: Deploying the Strategic Petroleum Reserve.”
Live webcast at globalwarming.house.gov.
My 5-minute Oral Statement (~750 words):
Mr. Chairman, members of the Committee.
I have three main points. First, we tried offshore drilling in 2006 and oil prices doubled.
Second, the only plausible remaining strategy for reducing oil prices fast is opening up the Strategic Petroleum Reserve or SPRO while making a major push for oil conservation.
Third, we’re going to sell off the SPRO by mid-century anyway. Why not do it now when consumers need the relief, and we can use the money to help end our oil addiction.
We must be honest with the public. Oil prices are headed much higher over the next 5 to 10 years unless we jumpstart the transition to low-cost alternative fuels, something even oilman T. Boone Pickens has said.
Conservatives insist that more offshore drilling will lower prices. But that is the one strategy we know has failed. We tried opening up most of the Gulf of Mexico to offshore drilling two years ago, but oil prices have doubled since then. Ending the moratorium on coastal drilling — where there is maybe one-fifth the oil already available for drilling in the Gulf — offers no realistic hope of reducing oil prices. Indeed, the Bush administration’s own energy experts have made the same point.
But selling a relatively modest amount of crude oil from the SPRO while promoting oil efficiency could pop the speculative oil price bubble and lower prices. It worked very well when President Bush’s father did it during Desert Storm, as my CHART shows [I will post on this later today].
On January 16, 1991, the President announced he would sell 34 million barrels from the Reserve to QUOTE “minimize world oil market disruptions.” That day oil sold for $32 per barrel. The next day, the price dropped by one-third to $21 per barrel. Oil remained in the $20 per barrel range during and after the war.
So imagine what would happen if the president announced he was going to sell 180 million barrels over the next year at a rate of 500,000 barrels a day. I advocate combining that sale with a strong push for oil conservation. This president — or more realistically the next president — should use his bully pulpit to launch a national oil efficiency education campaign urging consumers and businesses to take a variety of steps to reduce gasoline use. That could easily double the oil provided by the SPRO.
If oil prices did drop, that would vindicate this strategy. If oil prices did not drop, that would demonstrate how useless the strategic reserve is.
Let’s face it. The strategic reserve is not strategic. It was created at a time when people worried that countries could withhold oil from us. But now we have a global market, so that isn’t possible. We have replaced oil shortages with price spikes. So if we don’t use the SPRO to deal with our current price spike, when would we ever use it? After all, in the entire three-decade history of the SPRO, a mere 32 million barrels were sold during crises.
So I can’t imagine we’re going to keep this relatively useless “reserve” for many more decades. As you know better than anyone Mr. Chairman, we need to be almost completely off of oil by mid-century to avoid catastrophic climate impacts. So sometime soon we’re going to sell off the SPRO’s oil- I can’t imagine we are seriously going to keep $100 billion under the mattress forever.
I think we could use the price relief now. We could generate 20 to 25 billion dollars this year alone. Some of that could help low-income families deal with high energy bills. And some could jump-start the transition to a clean energy economy and end our oil addiction.
Gasoline prices are headed much higher unless we begin an aggressive switch to the only domestic alternative fuel that is both abundant and much cheaper than gasoline, namely electricity. We need to start spending billions of dollars accelerating the deployment of plug-in hybrids, energy efficiency, recycled energy, wind power, solar photovoltaics, and solar baseload.
In conclusion, conservatives argue oil prices will drop if we end the federal moratorium on coastal drilling – even though that might deliver only 100,000 barrels of oil a day sometime after 2020. How can anyone who believes that oppose releasing 500,000 barrels a day of oil starting now?
Of course, the first strategy would benefit oil companies and the second strategy would benefit the American people so that may explain who supports what.