Obama Proposes Tapping Nation's Strategic Oil Reserves To Help Drive Down Gas Prices

LANSING, Mich. — Barack Obama put forward a broad energy plan Monday designed to end U.S. reliance on imported oil within 10 years and shore up his standing amid a tightening White House race and high-anxiety over gas prices.

Obama's new proposal, though, includes two significant reversals of positions he has taken in the past: He had steadfastly fought the idea of limited new offshore drilling and was against tapping the nation's emergency oil stockpile to relieve pump prices that have stubbornly hovered around $4 a gallon.

Not only did Obama push for drawing from the Strategic Petroleum Reserve, he also reiterated his changing position on offshore drilling _ first revealed last Friday _ suggesting that he could live with it if done in an environmentally sound way and as part of a bipartisan energy compromise.

In a speech in Michigan, the Democratic presidential nominee in waiting also endorsed long-term work on hybrid cars and renewable energy sources.

"Breaking our oil addiction is one of the greatest challenges our generation will ever face," the Illinois Democrat told a supportive audience as he embarked on a week to focus on energy issues. "It will take nothing less than a complete transformation of our economy," he said.

Presumed Republican nominee Sen. John McCain, speaking in Pennsylvania, again advocated more oil drilling off the U.S. coast. "Anybody who says that we can achieve energy independence without using and increasing these existing energy resources either doesn't have the experience to understand the challenge that we face or isn't giving the American people some straight talk," he said.

Obama and McCain are emphasizing solutions to the country's energy woes as they seek an advantage in polling that shows the race competitive just weeks before their respective national nominating conventions and the final stretch of the campaign. The issue cuts across the diverse electorate, resonating with voters of all stripes, and it gives the candidates a way to talk both about domestic and foreign issues. High gas prices are causing food and transportation costs to surge and affect people's everyday pocketbooks in a weakened economy, while the country's dependence on foreign oil has emerged as a pivotal national security concern.

Obama, who as recently as last month argued against tapping into the petroleum reserve located in caverns in Texas and Louisiana, proposed that the government sell 70 million barrels of oil from its stockpiles and said that releases from the reserve in the past have lowered gas prices within two weeks.

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Explaining his thinking, campaign energy adviser Heather Zichal said that Obama "recognizes that Americans are suffering."

The reserve contains 707 million barrels in salt caverns in Texas and Louisiana. It was last tapped shortly after Hurricane Katrina in 2005.

Obama said that U.S. politicians have failed for three decades to deal with the energy crisis, and that McCain has been "part of that failure." He called tapping the petroleum reserves a short-term solution to a long-term problem.

"Like George Bush and Dick Cheney before him," Obama said of the Arizonan, "he sees more drilling as the answer to all of our energy problems, and like them, he's found a receptive audience in the very same oil companies that have blocked our progress for so long. In fact, he raised more than one million dollars from big oil just last month."

Also on Monday, the Obama campaign unveiled a television ad that criticizes McCain's energy policies. "After one president in the pocket of big oil we can't afford another," says the ad, referring to Bush's previous work in the oil industry.

Both candidates have moderated their positions since earlier this year. McCain abandoned his past opposition to drilling on the Outer Continental shelf and now is an aggressive advocate of such drilling.

"We're not going to achieve energy independence by inflating our tires," the Republican told employees at the National Label Co. in Lafayette Hill, Pa. Part of Obama's energy plan calls for consumers to fully inflate their tires for improved gas mileage.

McCain also called on Obama to join him in calling for Congress to return from its August recess to pass a comprehensive energy policy.

Gas prices have risen steadily as an issue since last November, according to a recent AP-Yahoo News poll. The issue rose to second place after the economy more broadly.

Obama said it was his "single overarching goal" to end U.S. reliance on oil from the Middle East and Venezuela over the next ten years, a project whose government pricetag he put at $150 billion.

The petroleum reserve is capable of releasing about 4 million barrels a day. It's unclear what impact such release might have on global oil prices, or costs of gasoline at the pump. But a clear signal by the United States to use its emergency reserve to a significant extent could put downward pressure on oil markets at least for a time, energy experts say.

In 2000, President Clinton used a similar "swap" of government oil as proposed by Obama, making available 30 million barrels because of concern over rising prices and supply worries in advance of that year's winter heating season. The move at the time was criticized by Republicans as an attempt to help then Vice President Al Gore's presidential bid.

Obama said that, under his plan, oil companies would bid to borrow easily refinable light sweet oil from the reserve, and replace it later with heavier oil.

Elgie Holstein, an Obama energy adviser, said that, while fewer refineries now are capable of refining the heavier stuff into gasoline, in the future that won't be the case.

Comments

[1will]

The Strategic Oil Reserve is for emergencies not so we can save .10 per gallon when going on vacation. This is the stupidest Obama idea yet and that's actually quite an accomplishment.
We're going to replace the oil taken from the SOR with oil that we cannot even refine? Great idea. Maybe I'll replace my 401k money with Monopoly Money because one day I might find a way to make it spend just like greenbacks.
This guy does not have the experience to lead. We all must use our natural God given gifts where they are appropriate. Obama should be giving motivational speeches in High Schools instead of trying to govern.

[wayofthefuture]

Many point to supply and demand, which is partially accurate, but the real answer is speculation. Savvy investors, known as speculators, buy oil not because they believe it’s undervalued like normal investors do. Instead, they buy because they speculate an increase in the price of oil. When more and more people want to buy oil, the price starts to go up artificially, regardless of the true market clearing price of oil. This artificial rise has caused a speculative bubble around the oil market, much like the dot-com bubble of the late 90s. For the bubble to burst, speculators will have to start selling rapidly, which will only happen if they believe the price of oil will go down.

The next logical question is how do we get speculators to sell? The answer is, to quote Newt Gingrich’s petition title, “Drill Here, Drill Now, Pay Less,” and here’s why. If the United States began drilling tomorrow, two things would happen. First, the eventual increase in production would slightly lower the price. Second, and more importantly, there would be a lot of uncertainty in the oil market throughout the world. The increased supply from the U.S. would lead many to deduce that the U.S. would have fewer foreign imports of oil. Out of fear, oil speculators would sell frantically, speculating a decrease in price, and burst the bubble.

[Hammerkraut]

Not surprisingly, this move comes on a day when oil declines another $4 per barrel. It's looking like the oil bubble might fully deflate before election day. Moves like releasing the strategic oil reserve will enable Obama to claim a share of credit if gas goes back to $3 per gallon. From Obama's point of view, the worst thing that could happen is that gas gets cheap and he can't claim to have had anything to do with it. That would only help McCain.

[RTIII]

Here is the first time one can truly say B O is advocating a truly stupid position. At least on all his other proposals and statements of position there was some argument that was intelligent - but not this one.

First, not only is the reserve too small to make any real dent in the world-wide supply / demand balance, but it has to be refilled because should there be a war with Iran or some other calamity that would affect oil supplies, it leaves us without a, well, STRATEGIC reserve! Duh! Because it will EVENTUALLY have to be refilled anyway, it can _at_best_ make a temporary help to the problem, albeit a small one, and that small benefit is completely offset by _adding_ to demand when the reserve is refilled! Unless, of course, one advocates using up the strategic reserve NOW and NOT refilling it, and how stupid is that?! Such a move would only make sense AFTER we don't need a reserve any more, and therefore the reserve will NEVER be useful to help reduce fuel costs at the pump. (It is worth noting that there was a time in history, before China's Most Favored Nation status, and before India, Indo-China and Malaysia grew into manufacturing giants when in fact use of the Strategic Reserve _could_ influence world oil prices - those days are long past.)

So, no matter how you cut it, this is BO's first truly stupid proposal / position.
.

[RTIII]

Here is the first time one can truly say Obama is advocating a truly stupid position. At least on all his other proposals and statements of position there was some argument that was intelligent - but not this one.

First, not only is the reserve too small to make any real dent in the world-wide supply / demand balance, but it has to be refilled because should there be a war with Iran or some other calamity that would affect oil supplies, it leaves us without a, well, STRATEGIC reserve! Duh! Because it will EVENTUALLY have to be refilled anyway, it can _at_best_ make a temporary help to the problem, albeit a small one, and that small benefit is completely offset by _adding_ to demand when the reserve is refilled! Unless, of course, one advocates using up the strategic reserve NOW and NOT refilling it, and how stupid is that?! Such a move would only make sense AFTER we don't need a reserve any more, and therefore the reserve will NEVER be useful to help reduce fuel costs at the pump. (It is worth noting that there was a time in history, before China's Most Favored Nation status, and before India, Indo-China and Malasia grew into manufacturing giants when in fact use of the Strategic Reserve _could_ influence world oil prices - those days are long past.)

So, no matter how you cut it, this is Barack's first truly stupid proposal / position.
.