Opinion: Columnists

A gas price emergency -- for America, or for Obama

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To combat rising gasoline prices, anonymous White House sources are reporting that President Obama will release oil from the Strategic Petroleum Reserve.

When Obama was inaugurated, the average gasoline prices were $1.84 per gallon, and oil was at about $39 for a 42-gallon barrel. On Monday, refiners were paying about $96 for a barrel of West Texas Intermediate, and the average price of regular gasoline was $3.72, up from $3.45 a month earlier.

The 696-million barrel Strategic Petroleum Reserve, stored in underground salt caverns in Texas and Louisiana, exists to protect America against "severe energy supply disruptions," according to the Energy Policy and Conservation Act of 1975.

Imports of oil and petroleum products are about 345 million barrels per month. That works out to two months of supply, in the unlikely event of a complete cutoff of foreign crude -- hardly an extravagant buffer.

Rather than release SPR oil, Obama could take other actions to enhance domestic supplies of crude oil and modify environmental regulations that push up gasoline prices.

EPA regulations require 18 different blends of gasoline in different states, depending on the season and on air quality. These "boutique fuel requirements" keep gasoline prices high because extra gasoline in one state cannot travel to another. A temporary waiver of these requirements would let the price of gasoline decline without significantly affecting air quality.

Another factor increasing gasoline prices is the requirement that ethanol, made from corn, be included in gasoline. It was enacted in the 2007 Energy Independence and Security Act with heavy lobbying by corn growers and environmentalists.

Now, ethanol prices are high because there's a drought, corn yields are down and corn prices are up.

Even environmentalists have turned against ethanol because they say it's responsible for greenhouse gas emissions. Rising corn prices encourage farmers to transform their land from forests and fields to corn, thereby losing the capture of carbon dioxide performed by trees and shrubs. Plus, ethanol production diverts corn from the food pipeline, raising global corn, meat and other food prices. When mixed with gasoline, ethanol also lowers your vehicle's gas mileage.

Ethanol no longer has a federal tax subsidy, but its use in gasoline is still required -- 15.2 billion gallons in 2012, and 36 billion gallons in 2022. Rather than be driven by dictate, the composition of ethanol in gasoline should be determined by demand and the relative costs of each product, which would mean greater efficiency in the energy market and lower prices for consumers.

In addition to such short-run solutions, the administration could consider longer-term supply measures that would enable more gasoline to reach consumers.

The administration could speed up approval of offshore oil and gas exploration and production applications, just as Interior Secretary Ken Salazar on Aug. 7 announced that he would "fast-track" seven solar and wind electricity-generating plants in California, Arizona and Nevada.

For instance, Obama could "fast track" the Keystone XL pipeline, which would bring oil from Canada to our refineries on the Gulf coast to replace the diminishing supply of Mexican and Venezuelan oil, and give speedy approval to requests from individual states from Virginia to California to Alaska for oil exploration.

Gasoline prices are the most visible energy prices in America, more obvious than monthly utility bills. Motorists see them regularly as they drive, even when they do not stop to fill up.

Rising gasoline prices cause politicians to worry. But rising oil prices two months before a presidential election does not qualify as a severe supply disruption, even if it may jeopardize the president's chances for a second term. Leave the SPR for a real emergency.

Examiner Columnist Diana Furchtgott-Roth (dfr@manhattan-institute.org), former chief economist at the U.S. Department of Labor, is a senior fellow at the Manhattan Institute for Policy Research.

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