While the price of gas at the pump is still high, it has been steadily dropping across the nation for the past three weeks. Motorists in many areas of Michigan are paying between 50 to 70 cents per gallon less than when gasoline prices were at their peak this past spring. The astonishing response of the federal government to this positive development, as announced by the Obama administration yesterday, is to release 30 million barrels of oil from the United States Strategic Petroleum Reserve.
The purpose of this reserve is to provide a supply of oil to keep the nation running during times of crises such as war or natural disasters resulting in significant supply disruptions. According to The Washington Examiner, President George W. Bush released oil from the reserve after Hurricane Katrina in 2005 and President George H.W. Bush tapped the reserve in 1991 during the Gulf War. The only other time the reserve was tapped was in 2000 when President Bill Clinton released oil as the price per barrel approached $40 – a price we would love to have today.
When gasoline prices soar as they have this year, many economic pundits claim that it will have only a small negative impact on the economy. Of course they are wrong and in the real world many households have to cut back on their limited discretionary expenditures as they have little choice but to put more of their money into filling the gas tank.
With the national economy once again flat-lining, it is tempting for politicians to try anything to jump start economic activity. Perhaps it is time for Congress to put in place statutory restrictions for releasing oil from the Strategic Petroleum Reserve except during times of actual crises. While they are at it lawmakers need to remove restrictions from developing oil reserves in the United States, including vast deposits in Alaska. If America continues to restrict development of oil and gas reserves at home it is evitable that we will someday face an energy crises that no amount of release form the Strategic Petroleum Reserve can fix.