The United States has 726.5 million barrels of crude oil stashed away in salt domes along the Texas and Louisiana coasts. Those salt domes are more or less full of oil right now.
Why do we have those reserves? The idea for reserving oil came about after the 1973 Arab oil embargo. For those of you who weren’t alive then, or don’t remember it, the Arab oil embargo was a bad, bad thing for the United States. We were so dependent on those Arab nations for our oil that we literally “ran out of gas” when they stopped selling it to us for a time. Just think what that was like.
Yesterday, President Obama announced that the U.S. would be releasing 1.5 million barrels of oil a day from our reserves through July. By the way, we’re not the only country with oil set aside for a rainy day. Nations in Europe and Asia also have oil tucked away, and they too, are releasing oil to bring the total release up to 60 million barrels, thirty million from us, and thirty million from the rest of the world.
Why are we releasing oil now? The price of gasoline seems to be going down, not up. Well, according to the Obama administration, releasing 30 million barrels of oil, (which will be sold, by the way, not given away for free), will help drive gasoline prices downward and thereby stimulate the economy as people will drive more, and take vacations, etc.
If you’re wondering how much help 30 million barrels will be, join the club. President Obama hinted that we could release more oil again in the immediate future, and then do it again, and again, if necessary. It’s been suggested that this is a way to confound the oil speculators, who have been accused of driving the price of oil too high. Greater supply means lower prices, no matter how you cut it. It’s not clear yet if this is actually enough oil to have a significant impact on the price of gasoline, but time will tell.
The Republicans’ take on this whole enterprise is that it’s a political ploy to bring the price of gasoline down and curry favor with the voters. Well, maybe that has something to do with it, but I think there’s more to it than that.
The OPEC nations met recently, and it wasn’t a happy meeting. For the first time ever, they couldn’t come to an agreement about how much oil to produce, and the upshot was that they were not going to boost production to meet demand. Guess which nation holds the top position in OPEC now? If you guessed Iran, you’re correct. As you may or may not know, the U.S. is not on particularly friendly terms with Iran. They appear to be building nuclear weapons, and they’re friendly to some of our worst enemies, so there you go…
Then there is Libya. As I wrote in an earlier blog post, Libya has the greatest reserve of light, sweet crude in the world, but Libya is in turmoil, and their oil shipments have fallen off sharply while they’re busy trying to kill each other. NATO keeps dropping bombs on Tripoli, but their leader keeps hanging on, and the oil situation becomes ever more problematic.
Does all of this give you an uneasy feeling? Here is an added tidbit of information for you. We get most of our oil from Canada, Mexico, (where thieves are busy stealing oil from their pipelines, by the way), and Saudi Arabia. Canada, of course, is stable and friendly, thank goodness. Mexico is having some problems with their drug cartels, as we know, but they’re still producing and sending oil our way, and then there are the Saudi’s. To put this in very simplistic terms, when we ask the Saudi’s how much oil they have in reserve, they won’t say. (Not all that unusual. Most of the OPEC countries are secretive about their reserves.) When they were asked to boost production earlier this year, they just didn’t quite get around to doing it. To compound our concern about Saudi oil production, they seem to be using a heck of a lot of their own oil for their own booming population. They burn oil to produce electricity.
Right after the announcement that we were going to be drawing from our oil reserves this summer, people jumped on the “electric car” bandwagon. This isn’t a feasible solution in the short term. Can you run out and buy a “Leaf” or a “Volt” this weekend? And even if you could, would you be able to drive the thing all the way to grandma’s house over the 4th of July holiday? Where would you fuel up along the way? Never mind the fact that we would be burning coal in most cases to produce the electricity to power all those electric cars. The climate change people would be all over that. More greenhouse gases! We have to be honest with ourselves about this. If there was a good, short-term solution for the oil problem, someone would have come up with it.
All most of us can do is watch this drama unfold, but we need to be aware of what is going on. Releasing oil from the strategic reserves when there is no apparent national emergency, such as Hurricane Katrina or the invasion of Kuwait, tells us something, and we need to pay attention.