Monday, August 4, 2008

Tapping the oil reserve

Just saw headlines "Obama endorses tapping oil reserves to ease gas prices".

Let's get something clear here:

The strategic petroleum reserve was created so that there would be oil for our military and necessary services in the event that there was no oil on on the market for them. Causes could be a natural disaster, a war, or another embargo.

It is not there to artifically bring down the price of a commodity in the open market when there is no actual shortage of oil on our market.

It is not there to make voters feel better about politicians of either party.

It is not there to be used as a political tool by anyone.

Using the reserve would only add a little oil to the current market. If Obama thinks that tapping this reserve will drop gas prices dramatically, then he's stupid. And we'll find out just how stupid he is when Iran shuts down the Strait of Hormuz or Chavez tries to show his manhood for his domestic audience by shutting off the taps. In those and other situations, we'll run out of oil on the open market pretty quickly, and what's there will be very expensive. If we've tapped the strategic petroleum reserve, then we're hosed. No fuel for defense. No fuel for ambulances, trains, or police cars. No emergency reserve of heating oil for the Great White North.

The only thing that's going to bring down the price of gas in either the short term or long term is to cut demand. Supply side economics won't work in the short term, and by the time the long term comes around, our economy will be in a wreck. Demand is falling as our economy cools, and the price of oil on the market has fallen over $20 over the past few weeks.

What we need to do is figure out how to cut demand over the long run while new sources of petroleum and new forms of energy come on-line. What that means is open to debate. Personally, I'm not against a national speed limit that's actually enforced. Tax breaks for consumers who purchase an efficient car and spend money on their home to make it more energy efficient might do in the short term.

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