National Journal: Tapping Reserve Lowers Consumers' Prices

Enough. That was the clear message President Obama sent last week to OPEC, Big Oil and speculators who have been wreaking economic havoc on the American consumer when he released 30 million barrels of oil from the Strategic Petroleum Reserve (SPR). The US was joined by our international partners, including Germany, France, the UK, Japan, and South Korea who also released oil reserves, pushing the total global oil injection to 60 million barrels.

This year's gas price shocks have hurt families and small business long enough. President Obama needed to take action to prevent inflated prices pull our economy off the road to recovery.

The SPR currently holds 727 million barrels of oil. This oil was purchased by and belongs to the American people. I have called for the release of the SPR several times this year. In February, I was joined by my congressional colleagues Rep. Rosa DeLauro, Rep. Peter Welch and other Democratic members in sending a letter , asking the President to take this action. We introduced legislation because the SPR is the only proven way to provide immediate relief at the pump for families who are suffering due to oil price shocks resulting from the current unrest in the Middle East, which has cut off all Libyan and Yemeni oil exports.

In 1991 when President George H.W. Bush tapped the SPR, it reduced prices by 33 percent. In 2000 President Bill Clinton reduced prices by 19 percent with an SPR swap. And in the wake of Katrina in 2005, President George W. Bush used the SPR to reduced oil prices by 9 percent. Indeed, the SPR has led to Sudden Price Reductions.

Enough with OPEC's Games:

In a perfect world, or better yet a free market, President Obama would not have needed to tap the SPR. But the oil market is not a free market. OPEC nations like Saudi Arabia and Iran control the supply and set the price. They do not have the health of the American economy in mind. Just two weeks ago, even with lower global supply, due to military conflicts in Libya and Syria, OPEC decided they had no need to raise production.

In truth, OPEC is willing to play any game with global oil markets that keeps prices high enough for them to make trillions (link), yet keeps the US addicted to their product. Saudi Prince Al-Waleed bin Talal admitted as much to CNN, recently stating: "We don't want the West to go and find alternatives."

American consumers spend nearly a billion dollars a day buying foreign oil. Keeping this transfer of wealth flowing to the Middle East is central to Saudi Arabia's ability to preserve their dictatorship and for Iran to protect state-sanctioned terrorist activities.

Enough with Oil Speculator Manipulation:

Oil speculation has been a major factor in the rising gas prices. Recently, Goldman Sachs told investors that as much as $20 per barrel of oil was due to speculation and not related to supply and demand.

By tapping the SPR, we have put those who seek to manipulate and profit off inflated gas prices on notice. This comes on the heels of the administration's crackdown on oil speculators at the Commodity Futures Trading Commission (CFTC). The CFTC recentlybrought suit against two oil traders who conducted a market manipulation scheme in 2008 that artificially inflated oil prices. After President Obama released oil from the SPR, one oil trader told the press: "This is a stake in the Dracula heart of speculators."

Enough with "Oil Above All":

The Republican "Oil Above All" agenda runs contrary to the needs of the American consumer. It was not surprising to hear leading Republicans joining with Big Oil companies in attacking the use of the SPR.

The Republicans are invested in helping their friends in Big Oil keep the price of oil high, and protecting their record profits. It's the calculation behind their budget plan, which would slash Medicare -taking money away from Grandma -while continuing billions in tax breaks and subsidies for the most profitable oil companies. The Republican budget cuts investments in alternative energy by 70 percent in 2012, and 90 percent over the next three years, ensuring that Big Oil faces less competition.

The GOP is also trying to gut the budget at the CFTC, which will take "the cops off the beat" in oil markets, allowing oil market speculators to keep driving prices higher.

Under President Obama, drilling for American oil is the highest it's been in a decade and natural gas exploration is booming. America is the third largest producer of oil in the world. But all that drilling has not moved the needle on gas prices. How could it, when we only have two percent of the world's oil, yet we consume nearly 25 percent. We cannot simply drill our way to energy independence or lower prices.

We must innovate and build our way to freedom from foreign oil and OPEC. The jobs renaissance taking hold in America's auto industry is driven by our efforts to boost fuel economy and get more vehicles on the road that use less oil.

Releasing oil from the SPR is an effective way to provide immediate, short-term relief from gas prices and protect our fragile economy as it recovers. But a domestic clean energy agenda, one that focuses on alternatives to foreign oil, has the power to unleash America's innovation, technology and manufacturing might once again.

By: Rep. Ed Markey
Source: National Journal