Economist: Approving Keystone pipeline better for oil prices than releasing strategic reserves
Approving the Keystone pipeline would have been a much more effective way to stem rising oil prices than using the United States Petroleum Reserve James Hamilton, professor of economics at the University of California, San Diego, told The Daily Caller News Foundation.
“If the administration had not blocked construction of the Keystone Pipeline for the last four years, every year we could have been delivering an additional 180 million barrels of oil to refiners on the U.S. Gulf Coast,” he said to TheDC News Foundation.
“That would be much more likely to have an impact than would another symbolic release from the SPR,” he added.
Hamilton also argued the primary beneficiary of releasing strategic reserves would be the government because of the revenue selling off the reserves would bring.
It was reported that oil prices fell on Friday after it was announced by the White House that President Obama was considering releasing some of the United States’ strategic oil reserves to slow increasing oil prices.
“Well, as we’ve said for some time, a release of the Strategic Petroleum Reserve is an option that’s on the table, but I don’t have anything to announce further on that topic at this point,” told reporters White House Principal Deputy Press Secretary Josh Earnest in a press conference last week.
This would be the second time that the Obama administration has released oil from the reserve to stabilize oil prices. Last year, President Obama released 30 million barrels of oil to offset the disruption in the global oil supply caused by fighting in Libya. This was matched by 30 million additional barrels released from stockpiles in other countries.
“Remember that the president already tried exactly the same strategy last summer,” Hamilton said. “What happened was the price of oil went down a few dollars a barrel for a few days, but within a week the price of oil was right back where it had been before the release.”
“I see little reason to anticipate anything very different if we tried the same thing again,” he concluded.
Only three times in history has a president released oil from the reserve. The first was by President George H.W. Bush in 1991 during Operation Desert Storm. The second release was by President George W. Bush in 2005 because of the destruction wrought by Hurricane Katrina on the oil industry in the Gulf of Mexico, and the third was by President Obama last year.
“The administration does carefully monitor the global oil market and the global price of oil. So it’s something that we watch closely because of the economic consequences for changes in that market and changes in the price,” Pearston told reporters.
The reserve was established in the aftermath of the 1973-74 oil embargo and was intended to give the President a tool to respond to disruptions in the oil supply that threaten the U.S. economy.
The petroleum reserve has a capacity of 727 million barrels, making it the largest stockpile of government-owned emergency crude oil in the world. The reserve currently has 696 million barrels of oil.
According to Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute for Policy Research, the U.S. imports 345 million barrels of oil and petroleum products a month, meaning releasing the entire strategic supply would only last about two months if the U.S. found itself cut off from imports.
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