Strategic Oil Reserve should keep its cap on

By: Joshua Dwyer

Posted: 9/8/04

Energy is a hot topic these days. From the United States' dependence on foreign oil and over-regulation of domestic sources to investment in renewable energy forms and the limits of non-fossil fuel technologies, it seems like everyone has something to say, especially special interest groups.

As the temperature rose this summer, so did the price of fuel. The national average price for regular unleaded gasoline reached $2.05 a gallon, according to a report by the AAA. Though the price has come down since its all time high, some economists and elected officials are calling for action to help ordinary citizens cope with the necessary expense of filling up.

Perhaps the most popular and publicized idea was for President Bush to authorize the sale of some oil reserves owned by the federal government to help lower the cost at the pump. The use of oil reserves to temporarily give Americans a lower gas price would be irresponsible as well as potentially harmful to the national security of the United States. Officials elected to serve their respective constituents need to be reminded that their position does not entitle them to recklessly pawn U.S. security to win votes.

The federal government owns more than 668 million barrels of crude oil in a group of storage facilities in Texas and Louisiana known as the Strategic Petroleum Reserve (SPR), according to the Department of Energy. Selling oil intended for "emergency use only" greatly impairs the United States' ability to withstand future hazards, especially with the frontlines of the war on terror in the Middle East. This vulnerability is even more salient when one considers the American Petroleum Institute's report that the United States imports more than 62 percent of its crude oil.

A useful analogy might be the low-on-funds college student who uses an emergency credit card for a festive weekend at Northgate, then bemoans his misfortune when the transmission goes out on his car and he can't afford to get it fixed. He did not solve his first problem, but merely exchanged it for a larger problem in the future.

Created in 1975 after the Organization of Petroleum Exporting Countries (OPEC) imposed an oil embargo against the United States in response to its support of Israel, the SPR was intended to be a safeguard against any oil supplier who might threaten to turn off its oil spigot in the future. It was also created to be an insurance policy against severe disruptions to the domestic oil supply, such as sabotage or a natural disaster, which might cause economic devastation.

The SPR was never intended to displace the inconveniences of a free market that determines the price of gasoline based on the accessible supply and required demand. The Wall Street Journal reported that as the need for crude oil increased in China and India earlier this year, the worldwide supply of oil was less than the new demand. This forced the increase in prices at the pump, not the greed of oil executives in the United States. Additionally, the amount of oil recommended to be used from the SPR may not improve the price per gallon of gasoline by more than a few pennies.

A little perspective is also needed. When adjusted for inflation, the gas prices of today are less than they were in the 1870s, the 1970s and early 1980s, according to msnbc.com. The hysteria regarding the new high prices should be tempered with a little historical understanding.

If certain congressmen were truly concerned with the energy prices that face Americans, perhaps they should consider other less risky alternatives. One of the fastest ways to reduce the cost of gasoline to the millions of Americans who drive automobiles would be to cut the amount of taxes they impose on every gallon.

The federal government charges 18 cents on every gallon and Texas adds an additional 20. This means that of the $1.79 a Texas A&M student may pay for gas, 38 cents of it actually goes to the federal and state governments. Any reduction in these taxes, even if it were temporary, would be immediately felt - and appreciated - at the pump.

Every year, Texas has a tax-free weekend to help people with back-to-school shopping expenses without bankrupting the state or drastically reducing its services. The elected officials should do something similar with fuel taxes rather than increase the United States' potential dependence on foreign oil by selling some of its emergency reserves.