5-14-08 by dugan
I hope the nay-sayers who insist that stopping the flow of oil into the federal Strategic Petroleum Reserve won’t drop prices were watching today. On news that U.S. petroleum supplies went up 200,000 barrels, the price of oil dropped by up to $2.24 a barrel. So… If President Bush stopped putting 70,000 barrels of oil a day into the reserve, that would add 490,000 barrels a week to the market. Supplies could rise 2 million barrels in a month just from capping the reserve alone. That’s about 10 percent of daily U.S. oil consumption–a big number in what’s known as an inelastic market. Growth in projected world oil consumption is also dropping, which should also push oil prices down over the next few months.
And as oil prices go down, gasoline will automatically come down, right? That ought to be the case, but another figure in the federal supply reports gives pause. U.S. gasoline supplies on hand fell by 1.7 million barrels, or 71 million gallons (equal to about 20% of daily nationwide consumption). This means refineries are cutting production, not because they can’t make the gasoline, but to keep the price of gasoline up and increase their profits.
That’s why Congress can’t just do one thing. The big oil companies extract, buy and sell oil–including to their own refineries. There,they make and sell gasoline and diesel. They demand ever-rising profits from both ends of the business, and see recent refining profits as anemic, despite record-busting overall profits ($123 billion for the biggest 5 companies in 2007).
So what if their profit wrecks the economy.
And that’s why Congress should also require that oil companies and refineries produce enough to keep national gasoline supplies on hand at a reasonable level–about 30 days’ worth, up from a recent average of about 22 days.