The country has a Fort Knox of oil — some $100 billion in ready to refine petroleum that is just sitting in the ground doing nothing useful whatsoever. Also, we waste another Fort Knox worth of black gold (Texas tea?) driving poorly maintained cars in a very inefficient manner.
Imagine if this country were led by someone who was not a former oil industry executive. It isn’t hard to do. Nothing to kill or… Just imagine Dick Cheney was not in charge, but some hypothetical inspirational progressive politician.
What might such a real leader do to cut oil prices in the short term, raise some money for needed clean energy investments (and tax cuts for those hardest hit by oil prices), and in general bring the country together during a time of war in the Persian Gulf?
Dan Weiss and I have laid out such a plan, “Bursting the Oil Bubble: Sell Oil from the Strategic Petroleum Reserve to Lower Prices.” Combine tapping the oil reserve with a national push for conservation, and you could bring half a million to a million barrels a day of new supply for a year plus the same amount or more of demand reduction. That could, for a while, burst the oil bubble.
You may say I’m a dreamer, but I’m not the only one….
I hear my faithful readers asking, but Joe, how can you possibly support releasing oil whose consumption will inevitably increase greenhouse gas emissions?
I’ve never had much doubt we would use most of the world’s conventional oil and gas. The stuff is just way too useful and difficult to replace. As for the Strategic Petroleum Reserve, this country is not going to sit on that much oil forever. Somebody is going to use it sooner or later.
So why not use at least half of it now when it could actually bring an infusion of new money that might be used for clean energy.
Dan is more conservative than me. I’d sell one million barrels a day for a year (along with the conservation effort) and maybe give half the money back in an oilbate (since the taxpayers did pay for the oil originally, albeit at a much lower price). Then I’d take the rest and spend it on accelerating the deployment of clean energy and plug-in hybrids.
I hope someday you’ll join us, and the world will live as one (or as ten billion, I’m kind of iffy on the living as one stuff, myself).
Previous in TP Climate Progress
no NYMEX reform or windfall tax? no requirement for domestic fuel to be sold at a domestic rate, so that heat oil is affordable, f’r'instance?
Who are you? And what have you done with Joe Romm?
What Roger Chittum just said…
The SPR has no use to this nation. $100 billion, on the other hand, could jump-start clean energy transition. Don’t worry. Bush would veto it.
Ditto.
Sorry Joe, talking about carbon emissions on one hand and using more oil to satiate the natives consumption is counterproductive.
Me, I advocate rationing. 10 gals a week. You suffer, I suffer.
Besides me worry? I pedal a bike everywhere I go nowadays. 56 and going strong.
Set an example. You cannot ask others to do what you are unwilling to do. The gravy train is over. Rationing is the only way to get really serious about what an emergency this is. If not, you aren’t paying enough attention.
Besides, oil should not be used for “burning”.
How dare we.
The SPR has the value of keeping OPEC from turning off the spigot once again.
Well, anyway, that was the original purpose, was it not?
I thought Roger Chittum’s comment was the funniest thing I’ve seen at climateprogress.org in a while. You should give him a gold star :-)
I think they are commenting that you’re starting to sound like the Breakout Institute in that post.
On the serious side, I propose criteria for using SPR oil for efficiency:
* Each SPR barrel sold should result in 10 barrels saved by 2020 (i.e. the return on investment should be high)
* SPR release should be linked to a limit on the upstream GHG content of new production (in effect banning CTL and oil sands)
I find the language in Bursting the Oil Bubble a little too vague to buy into. I don’t think Presidential “urging” is worth much. We need concrete steps. We don’t need reminders to fill our tires, we need a program where they must be inflated to pass a smog check (and new cars should have automatic tire inflation). We also don’t just need more mass transit; we need better mass transit. Taking Amtrak is 49% more GHG per passenger-mile than two people in a Prius. This is horrible; mass transit needs to be as electric as our future cars. The TGV in contrast beats four people in a Prius.
Just last week climateprogress declared a million bbls/day from ANWAR would have almost no effect on prices. Who’s kidding who? The original and ongoing purpose of the SPR is to make sure the military has fuel in time of crisis. At one time, the military had its own oil fields and refineries that I think were run by the Navy. Those operations were replaced by the SPR. It is not surprising that progressives, who oppose every new source of domestic oil production and who favor every scheme to raise energy prices, make this disingenuous proposal that would do nothing but negatively impact national security.
Joe – You’ve finally lost the plot. High oil prices are exactly what we need to focus people and industry on alternatives. The SPR has a specific purpose, which is to provide a buffer against a short term interruption in supply. You would be mad to trade in this insurance at a time when the chances of a blow up in the Middle East are high.
I have an idea…….all those who believe that burning fossil fuels harms the environment should stop burning them. That should cut demand.
To All Who Object to JRs Suggestion – Please consider the angle Joe’s taking: political expediency. His idea overcomes all of the current Repubican tactics to stall renewable energy development. This idea is NOT uncharacteristic of JR.
The Republicans have a pretty effective campaign of hyping the short-term cost of any renewable energy initiative. The average voter associates any renewable initiative to a near-term increase in the cost of oil/gas. This is a pretty effective way for the Republicans to turn voters against renewable initiatives.
JRs idea does three things simultaneously: 1) fund renewable energy initiatives, 2) lower the near-term price of oil/gas, and 3) give people money. All of these are things the voters would like. None of these is something voters would object to. Republicans would be hurting themselves politically if they opposed these outcomes.
The comparison to ANWR is invalid because releasing oil from the SPR will have an immediate effect on price, while ANWRs effect will be delayed by the years it takes to ramp up production.
I understand that low oil prices reduce the urgency to develop renewable energy, but there is a point where the price of oil gets too high. If it gets so high, so soon, that coal and nuclear power gain more support than renewables, that’s a bad thing! JRs suggestion will moderate the price of oil enough so that we don’t turn to coal/nuclear in desperation. Renewables need some time/funding to get established (not necessarily in a technical sense, but in a political and market sense). Once renewables are established in the public mind, we can safely let the price of oil increase indefinitely, because the alternative will be renewables.
The SPR oil does nothing by sitting in the ground. By selling it to fund renewables, the short-term use of the SPR creates long-term renewable power sources and establishes renewable’s as a practical, cost-effective energy source in the public mind.
This is a politically brilliant use of the SPR, and consistent with JRs practice of promoting practical (in this case, politically practical) solutions to difficult problems. The idea is sound. Careful implementation (without loopholes) must follow.
Very funny comments above.
Joe, you occasionally renew your subscription to The Cheap Energy Contract, which has been the default political position in the energy field for the past half century or so. To me, this represents an occasional retreat from the general idea which you otherwise advocate that we need to be investing full bore in clean energy infrastructure. Your allegiance to the Contract pulls you into a weaker position than you would have otherwise, I believe.
The main criticism you level against nukes, for instance, that they are expensive, misses the point. Renewables that replace coal will not be cheap for a while (though they don’t “need breakthroughs” to get cheaper…just economies of scale and lowered financial risk). So by arguing that nukes are expensive you are opening yourself up to the same criticism of renewables that effectively will replace coal or other fossil fuels.
Releasing the SPR does not in my mind increase emissions, since I cannot possibly conceive of a scenario in which the that much federal free money goes unspent.
I don’t believe in the “cheap energy contract” — this wouldn’t bring about cheap energy (long term, low cost fuel or power). It would bring about cheaper energy for several months perhaps a year.
But we need a source of money to fund the ITC and PTC extension, among other things.
Paul K, the point of the suggestion is not to lower gasoline prices (though it might allow a politician to claim he or she is doing something in this regard), but to provide cash to fund necessary changes. Remember that the Democrats are running Congress, which means that the fiscal responsibility (such as it was) that was thrown out by the Republicans will likely return, and it will be necessary to actually pay for spending, rather than just borrow. I suspect that if ANWR were to provide $97 billion to the Federal government to spend on energy efficiency, Joe would be proposing drilling there. However, most of the revenue from ANWR would go to the oil companies, and so not accomplish anything.
I guess someone would need to convince me that the revenue earned from the release of supply from the SPR would be used for clean alternatives.
Based on where money disappears and is redirected in the current accounting framework of this country’s treasury I assume each of you are willing to give a vote of confidence that you believe in what our government tells us it is doing.
Now that the new guy has been introduced, I’m thinking he’ll be OK. Not even sure if I’ll miss Ol’ Joe.
Occasional comments on this blog have been to the effect that it is morally impure, or unnecessary, or otherwise wrong to be concerned about costs and economic impact of a GHG reduction program on ordinary citizens and businesses. There is also the view that the best program–some say the only workable program–is to destroy demand by manipulating energy prices upward. I disagree entirely with those ideas. We must proceed in the most cost-efficient way possible.
Saving the planet will have costs somewhere between significant and totally infeasible–depending on how we go about it. The less a program costs, and the more it is consistent with a continuing robust economy, the sooner we can start and the faster it will reduce GHGs.
High oil prices are now stalling the economy, are starting to get worked into “core CPI” prices to produce stagflation, and are causing acute economic pain to at least half the population. Modest crude oil demand reduction in the US will result, but it won’t be just the direct effect of less driving–it will be due to a general economic slowdown, including less freight moved, fewer airline miles flown, and lower volumes of petrochemicals and plastics produced. No politician is going to buy a used legislative program from folks who are seen as cheerleaders for economic decline like this.
According to this morning’s New York Times (page 1), The Saudis are going to announce a 0.5 MM BPD production increase this month. We’ll see soon if that scatters the speculators. I hope that it does and that it may be unnecessary to open the tap on SPR, but it is worth considering.
@roger chittum
been waiting for that approach to work. waiting and waiting and waiting. now we’re hearing talk of 20 years to get rid of coal, and it sounds to me like you’re advising we avoid “cost” without regard to “benefit” or “savings”?
this economic downturn is the fault of the current planners.
the current car salesmen. not metaphorical. how’s their reputation in washington? stable? sacrosanct? they really have trouble getting their legislative proposal through, don’t they, with all that baggage they’re carrying, all their cheerleading for the end of the world and for unlimited energy prices that they get to keep, impoverishing everyone else.
what was it that guy said about the oil market? it’s looking “bullish”?
maybe you’re right, unintentionally; we’re too dumb to figure in the total cost of operation.
sorry. that was too strong.
here’s the problem as i see it.
we’ve all known that 450 ppm wasn’t the right stabilization number. we knew we were going to lose more carbon sinks and we knew that since climate science was consistently underestimating the speed of ecosystem decline, that meant climate science’s atmospheric safe zone estimate was deeply suspect.
hansen’s people say the safe zone is below 350 and that we can’t practically expect to get there if we even peak at 450, because there’s only so much we can take out. this isn’t news.
hansen’s best estimate then is that coal emissions must go away in rich countries by 2025 and non-rich countries by 2030. oil and natural gas, besides scarcity and extraction expense, can be handled with ordinary market forces. that isn’t news.
the news is for finance people.
assuming, fairly, that CCS is a dream, we have less than 20 years to replace coal, ok? all that equipment. and a fair amount of oil-dependent equipment.
20 years: less than one investment cycle.
meaning that if we choose to ignore the clear signs that the safe target is below/behind us, we’ll not only need to be replacing all the dirtiest equipment — truly sunk costs, mostly with their original capital debts repaid — we’ll have new sunk costs, fully indebted, of equipment that was built on moderate-reduction-curve assumptions, during this coming pro-active administration/congress.
so if you want to talk about how much things will cost, factor in the likelihood of the major target being dropped drastically, and a major part of the first round of serious mitigation effort having to be scrapped because the lenders and operators assumed they’d finish cleaning up their industry between 2030-50.
Saudis will do it for you. :-)
“Plan Would Lift Saudi Oil Output”
http://www.nytimes.com/2008/06/14/business/14oil.html?_r=2&partner=rssnyt&emc=rss&oref=slogin&oref=slogin
The US trade deficit is heading towards $1 trillion a year. If you were to offer the contents of the SPR on to the world’s markets it would make a barely perceptible dent in either the per-barrel price or the US trade deficit.
Having done this the US would then have no reserve and be sitting there with its legs wide open waiting to be kicked in the goolies by some well meaning friend such as Chavez or Ahmadinejad. Now that WOULD get the speculators excited.
Great plan Joe.
So “If you were to offer the contents of the SPR on to the world’s markets it would make a barely perceptible dent in either the per-barrel price” — BUT it somehow offers a defense against … what exactly? Nothing, by your own admissions.
It serves no value. Might as well get some clean energy $$$ for it.
You all sound like pretty intelligent scientific types.
How much any of you want to bet we have less than twenty years before we know our our ultimate fate?
And that it won’t matter by then.
forget it. you win either way.
Plan Would Lift Saudi Oil Output
By JAD MOUAWAD
Published: June 14, 2008
Saudi Arabia, the world’s biggest oil exporter, is planning to increase its output next month by about a half-million barrels a day, according to analysts and oil traders who have been briefed by Saudi officials.
Times Topics: Oil (Petroleum) and Gasoline
The increase could bring Saudi output to a production level of 10 million barrels a day, which, if sustained, would be the kingdom’s highest ever. The move was seen as a sign that the Saudis are becoming increasingly nervous about both the political and economic effect of high oil prices. In recent weeks, soaring fuel costs have incited demonstrations and protests from Italy to Indonesia.
Joe
As I’m sure you know, the SPR was set up in 1975 as a buffer against the sort of temporary supply disruptions that occurred in the 70′s. It currently holds some 705 million barrels.
http://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve
Some 60% of the world’s oil passes through the Straits of Hormuz and any sort of blow up in the ME would be likely to shut in this oil. The SPR would keep things ticking over in the US for 160 days (at 4.4 mbopd) while the problem was hopefully resolved. Note: in an emergency the SPR would be used exclusively by the US as a supplement for missing imports, whereas if it was sold off now it would just flow into the global market. Big difference.
The US is not the only nation with an SPR. Japan and China both hold similar reserves. The very fact that such reserves exist reduces the scope for blackmail. It is also proving one of the US’s most profitable investments – I wish I had 705 million barrels of oil appreciating in my back garden!
The other BIG problem with your argument is that, even if it was sold off, the money would not be spent on clean energy. Politics and economics just don’t work that way.
Wow, the IEA says “IEA Member countries are holding some 4.1 billion barrels of public and industry oil stocks, of which, roughly 1.4 billion barrels are government controlled for emergency purposes.” That is a lot of non-government oil reserves. Someone is making a lot of money with the recent price rise.