Some Democrats are also urging Obama, who has pressured other nations to curtail purchases of Iranian oil, to protect consumers by releasing oil from the Strategic Petroleum Reserve, as he did during the Libyan conflict last summer. Most presidents are reluctant to tap the reserve without a dire emergency, and many experts believed the release last year had a fleeting impact on gas prices.
Brad Plumer explores whether tapping the nation’s strategic oil reserves could help lower gas prices:
As oil and gas prices soar — due, in part, to tensions with Iran — many Democrats have called on President Obama to tap into the nation’s Strategic Petroleum Reserve to moderate the shock. But would this move actually work? That’s not so clear.
A new policy brief (pdf) by Philip Verleger of the Peterson Institute for International Economics lays out how the United States might use its crude reserves to blunt the effects of the new oil sanctions on Iran. Verleger starts by noting that it’s still uncertain whether the U.S. and E.U. embargo will actually raise oil prices in the long run. (One alternate scenario is that Iranian oil will go to refiners in India, who would sell at a discount.) But if oil does keep getting pricier, Verleger writes, then the United States could try to sell some of its surplus crude on the world markets — say, 500,000 barrels a day for up to 18 months — to avoid serious economic damage.
The United States certainly has some oil to spare. By Verleger’s calculations, the United States now has 276.4 million barrels of crude sitting in its Strategic Petroleum Reserve(SPR). If anything, he notes, the United States is storing far more oil than is required under international agreements, because domestic production has risen and U.S. gasoline demand has fallen. “The decline in U.S. net imports,” Verleger writes, “frees up significant amounts of SPR stocks.” In other words, because our domestic supply has become more secure, we have more oil to send to Europe to ease the crunch there.
The big question, though, is whether the United States should use its strategic reserves right now, and whether a release would actually tamp down gasoline prices. In theory, says James Hamilton, an oil expert at the University of California San Diego, the Strategic Petroleum Reserve is only supposed to be used when there’s a sudden and severe loss of oil supply — as happened after Hurricane Katrina, when 25 percent of U.S. production in the Gulf of Mexico went offline. “That was a short-term, temporary disruption,” Hamilton said. “With Iran, we don’t know the endgame yet. There are still too many uncertainties.”