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Democrats Want to Use US Oil Stockpile to Relieve High Prices; It Won’t Work!

By James Burgess | Sat, 25 February 2012 18:11 | 3

Due to fears over the situation in Iran, amongst other things, oil prices are at a nine month high, and petrol prices are also at near record levels. These high prices have spurred Democratic Representatives Ed Markey of Massachusetts, Peter Welch of Vermont, and Rosa DeLauro of Connecticut, to write a letter to Obama in order to ask him to use oil stockpiles to help reduce the price of oil in the US. The US holds 696 million barrels of oil, the world’s largest, government owned stockpile, to be used in times of low oil supply.

“This most-recent run-up in prices is primarily the result of fear driving oil markets,” Markey, Welch and DeLauro wrote to Obama. “We urge you to consider again deploying oil” in the reserve “to combat the rapid price escalations resulting from speculation.”

The Washington based American Petroleum Institute has agreed that using stockpiles to increase supply could lower prices, but only for a short time. Their chief economist John Felmy believes the stockpiles should not be used, suggesting that, “it drains reserves that could be needed in a real supply emergency.”

The Republicans are also opposed to the use of oil stockpile. Senator Lisa Murkowski of Alaska, the senior Republican on the Energy and Natural Resources Committee, said “The Strategic Petroleum Reserve (SPR) is there for times of emergency and supply disruptions. It is imperative it be available for a serious supply disruption down the road,” such as interruption of the crude oil supply from Iran.

The supply of Iranian oil to the global market could be severely restricted by a closing of the straits of Hormuz, or armed conflict against the US and Israel. It is during these times of oil shortage that the stockpiles should be used, to ensure the US has enough oil to operate on a daily basis. Such as last year when the International Energy Agency used some of the oil stocks to ease shortages in supply during the conflict in Libya. Current high prices are not caused by oil shortages.

Richard Jones, deputy director at the IEA, confirmed that “the market is currently quite well supplied. There is actually no disruption at hand.”

Nancy Pelosi of California, the House Democratic leader, also agrees that oil supply is not the problem. “Speculators are driving up the cost of oil, hurting consumers and potentially damaging the economic recovery. Wall Street profiteering, not oil shortages, is the cause of the price spike. In fact, U.S. oil production is at its highest level since 2003.”

The US should remain patient. The odds are high that oil prices will continue to rise as the situation in Iran roles on, and the possibility of a loss of supply to global markets from a conflict in the region is not far-fetched. The SPR must be used as a last resort to ensure the continued survival of US industries reliant on oil, not just to help relieve the pressure on wallets created by high prices in the short term.

By. James Burgess of Oilprice.com

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  • kafantaris on February 26 2012 said:
    Iran is in a dilemma. On the one hand it wants to show the world all it’s got and put it at ease, while on the other hand it fears that such show 'n tell will give its enemies a roadmap to bomb it.
    Saddam Hussein faced a similar dilemma ten years ago. Though he wanted the world to know he had nothing to hide, he also wanted to bluff his archenemy Iran into believing Iraq still had WMD.
    Bluffing did not go well for Saddam, and it might not go well for Ahmadinejad.
    But since the price tag for ridding Saddam proved high, we ought to reflect what we are asking of Iran now. On the eve of a threatened attack, we are asking it to take us to the depths of its arsenal and show us all it's got.
    Such great expectations are a sign we have been talking to our friends too long and are in need of a broader perspective. Exactly when was the last time we asked Pakistan, India, China or Russia to show us their arsenal?
    “But those countries are not advocating the destruction of Israel.”
    True, but Israel is not a thorn on their side either.
    Surely, however, we can see beyond the hyperboles and figure out their underlying purpose. Or have we forgotten that not all Iranians are thrilled with Ahmadinejad?
    He sure hasn’t.
    Nor has he forgotten that that his countrymen hate Israel even more. So he tells them that Israel will be wiped from the face of the earth. Expectantly, this nonsense unites them against a common enemy. It even becomes a diversion from the misery and isolation brought on by his anachronistic regime.
    Quite clever work by Ahmadinejad -- and not a rial spent or a bullet fired.
    So why are we letting the crazy talk about destroying Israel get us all worked-up -- to the point of turning the world topsy-turvy again.
    Can we not plainly see the machinations of an unpopular regime trying to hold on to power?
  • Jerald M. McNett on February 26 2012 said:
    When our reserve oil supply is no longer available our country shall be at the greatest risk EVER ! As it is today it seems that Obama is more interested in other countries than the U.S.A. By his stopping drilling in the Gulf Of Mexico. The stopping construction of the Trans-Canada to the South pipeline.
    Do Not allow our reserve oil to be used and especially at this time. It is time to impeach Obama along with all his ruin this country Compadres.
    Do the job you politicians have promised and uphold our Bill of Rights and The U.S. Consitution.
    And may God Bless the U.S.A.
  • richard davidson on February 26 2012 said:
    The biggest reasons the price of gas is going up:

    1. Reduced refining capacity
    2. US gas is less expensive than many other countries because natural is used to provide the energy to refine oil into gasoline distillates
    3. The US dollar is cheap and going down- countries with excess dollars are spending them on useful commodities such as oil, gas, beef, metals, grains etc while they can still get something for their money. Until Americans elect politicians who recognize that unlimited spending of money that we don't have is INSANE, prices will only get worse- until they reach Weimar Republic or Zimbabwean proportions.

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