“Should Oil Reserve Be Tapped To Bring Down Prices?” |
| Should Oil Reserve Be Tapped To Bring Down Prices? Posted: 09 Mar 2011 03:57 AM PST Since the uprisings in the Middle East and North Africa, gas prices have gone up. The U.S. has an emergency stockpile called the strategic petroleum reserve. It was last tapped five years ago after Hurricane Katrina. Sarah Ladislaw, a senior fellow at the Center for Strategic and International Studies, talks to Ari Shapiro about when it makes sense to tap the reserve. Copyright © 2011 National Public Radio®. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required. ARI SHAPIRO, host: Gas prices keep climbing. Now a gallon of regular is about $3.50. And since the Middle East is still in turmoil prices could go even higher. The U.S. has an emergency stockpile, called the Strategic Petroleum Reserve. It was last tapped five years ago after Hurricane Katrina. We called Sarah Ladislaw to talk about whether it makes sense to tap the reserve again now. She's senior fellow at the Center for Strategic and International Studies. Welcome to the show. Ms. SARAH LADISLAW (Senior Fellow, Energy and National Security Program, Center for Strategic and International Studies): Hi. SHAPIRO: OK. So compare this moment in U.S. history to five years ago, the last time we tapped the reserve. What's similar? What's different? Ms. LADISLAW: There's a lot of things that are different. And in that instance we actually did have a supply shortage. And right now the consensus opinion is that we don't, that oil markets are well supplied with crude. Whereas Hurricanes Katrina and Rita were sort of like a one-two punch of supply disruptions that actually triggered an international drawdown in strategic stocks. So there was a well agreed upon foundation for that release. SHAPIRO: Is there any reason to tap the reserve just to bring down prices? Ms. LADISLAW: We have the discussion every time oil prices rise. If the U.S. were to tap its Strategic Petroleum Reserve does it send a signal to the market that we're prepared to use it? And does that then calm markets? And there's a really big disagreement. And anyone who tells you they have the right answer is probably lying, because we haven't really tested it out in this specific situation. And so the question is if we put oil on the market when the market is saying that it doesn't actually need the crude at this point will that have a calming force? And I think it's a risk. Do the oil markets then read into the situation that the United States is nervous? SHAPIRO: Because putting oil on the market from the reserve suggests that the U.S. might believe there's a long term problem in the oil supply? Ms. LADISLAW: It could. And so I think what's actually more important than the actual decision to draw it down is the messaging about drawing down. It's kind of like when the Fed comes out of a meeting and signals something about what they're going to do with interest rates. People read very carefully into what that statement is. And so you're starting to see politicians have statements back and forth to one another. No one's actually said that we should draw down the SPR right now. But they're starting to say, well, we're prepared to do it. We're thinking about doing it. SHAPIRO: I've read some analysts who say high oil prices are exactly what the U.S. needs to get out of its dependence on Mideast oil and the connection to Mideast governments that have been so problematic. Ms. LADISLAW: Yeah, you know, I mean, I think that's the other half of this. And one place where, you know, I think the administration probably has a good argument to do some messaging is we should congratulate ourselves for having a Strategic Petroleum Reserve and international strategic stocks. It's good planning. But the long term planning that you need to do to be able to diversify we have historically not done a very good job of doing in this country. And so, you know, in the last few years we've done a lot to try and increase the role of bio fuels and increase the fuel efficiency of vehicles, but there's a lot of folks in this country who don't think it's enough. SHAPIRO: At the same time I can imagine people across the country who are tearing their hair out saying in this economy I can't pay my food bills and now you're asking me to tolerate $3.50 and upwards for gas. Ms. LADISLAW: That's where a lot of the political pressure comes. I mean, there is no one policy mechanism out there that can guarantee continued low prices of oil for the American public. And I think that that's a pretty honest message that people are going to have to realize, that's in our interests to envision a future where we need to start making smart, you know, choices now about greater efficiency and driving habits and choices like that. SHAPIRO: Sarah Ladislaw is with the Center for Strategic and International Studies. Thank you. Ms. LADISLAW: Great. Thank you very much. (Soundbite of music) SHAPIRO: This is NPR News. Copyright © 2011 National Public Radio®. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to National Public Radio. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information. NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. 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