Obama Says U.S. Prepared to Tap Strategic Petroleum Reserve, If Necessary
President Barack Obama said he’s prepared to tap the nation’s strategic oil reserve if necessary to deal with any disruptions in the energy supply and said the Justice Department will be on the watch for any evidence of price gouging.
“In an economy that relies on oil, gas prices affect everybody,” Obama said at a White House news conference.
Obama refused to say what level prices would have to hit that would prompt the government to open the Strategic Petroleum Reserve stored in caverns along the U.S. Gulf coast. He said the government could begin pumping from the reserve within a few days if necessary.
“One of the messages that I want to send today is that we are confident about our ability to fill any potential gaps in supply,” Obama said.
The cost of oil has surged 22 percent over the past year and gasoline prices are at their highest in more than two years on concern that the unrest in the Middle East and North Africa will spread to major oil-producing countries.
Economic Impact
Obama said the U.S. economy is able to manage the disruption and a 2 percent payroll tax cut that took effect Jan 1 “should help act as a cushion” to the impact of rising gasoline prices on consumer spending. He said the tax cut added an extra $80 per month to the average U.S. worker’s paycheck.
Even with the recent rise in energy costs, the U.S. economy is continuing to recover from the recession and is moving toward greater job growth, he said.
The nation should boost domestic oil and gas production, he said, while also intensifying efforts to encourage a shift to alternative clean-energy fuels, a goal that has been a centerpiece of Obama’s White House agenda.
Quoting billionaire energy investor T. Boone Pickens, Obama said, “This is one emergency we can’t drill our way out of.”
“We can’t place our long-term bets on a finite resource that we only control 2 percent of,” Obama added, referring to the U.S. share of global oil reserves.
Oil for April delivery tumbled $1.71, or 1.7 percent, to $100.99 a barrel at 12:50 p.m. on the New York Mercantile Exchange. Prices fell after Japan’s strongest earthquake in at least a century shut refineries in the world’s third-largest oil-consuming country.
Calls for Reserve
Some Democratic members of Congress have been pushing the administration to release some of the 727 million barrels of oil stored in the nation’s Strategic Petroleum Reserve to help calm markets and reduce prices. Republicans blamed Obama’s energy policies for higher energy costs.
“The Obama administration has consistently blocked American energy production that would lower costs and create new jobs,” House Speaker John Boehner, an Ohio Republican, said yesterday as party leaders announced plans for legislation intended to increase access to domestic energy sources, speed regulatory review for new pipelines and wells, and expand all forms of energy in the U.S.
Obama said at the press conference U.S. oil production last year reached its highest level since 2003.
“Any notion that my administration has shut down oil production might make for a good political sound bite, but it doesn’t match up with reality,” Obama said.
Setting Standards
He said that following the oil spill in the Gulf of Mexico the White House has put in place “common-sense standards like proving that companies can actually contain an underwater spill.”
Gasoline costs have increased every day except one since mid-February. The average retail price for a gallon of regular gasoline was at $3.54 yesterday, compared with $2.77 a year ago, according to the AAA price survey.
The higher prices at the pump may restrain the gains in consumer spending that has bolstered the U.S. recovery. As a rule of thumb, a sustained $10 a barrel increase in the price of oil reduces growth in the U.S. gross domestic product by 0.2 percentage points, said Nigel Gault, chief U.S. economist for IHS Global Insight.
Consumer confidence fell last week to the lowest level in a month as surging gasoline prices soured Americans’ outlook about their finances and the economy.
The Bloomberg Consumer Comfort Index dropped to minus 44.5 in the period to March 6 from the prior week’s minus 39.7, which was close to the highest in almost three years.
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