Bloomberg News

Strategic Oil Use Would Have Small Impact on Gasoline, IHS Says

March 27, 2012

Releasing crude from the Strategic Petroleum Reserve would have a limited impact in lowering U.S. gasoline prices, James Burkhard, managing director at IHS- Cambridge Energy Research Associates, told lawmakers.

The Obama administration should leave the emergency inventory for supply disruptions, such as a loss of output tied to tensions over Iran’s nuclear program, Burkhard said in remarks prepared for a House Committee on Energy and Commerce hearing tomorrow.

“If the SPR is used to influence the price of gasoline, it is a blunt instrument with limited prospects for a lasting impact,” Burkhard said in remarks posted on the committee website. “The original purpose of the SPR was not to manage prices -- an extremely daunting challenge even under benign conditions -- but to help address a major oil supply disruption from the Persian Gulf.”

The committee led by Representative Fred Upton, a Michigan Republican, will consider a bill tomorrow forcing the administration to plan for increased oil production on federal lands when withdrawing oil from the inventories.

The U.S. continue to weigh using the stockpile an option to ease potential supply restrictions, Charles McConnell, acting assistant secretary for fossil energy at the Energy Department, said today.

Democrats led by Representative Ed Markey of Massachusetts urged the use of emergency inventories to “prevent a runaway increase in prices,” according to a letter he sent with Rosa DeLauro of Connecticut and Peter Welch of Vermont to President Barack Obama on March 16.

The average price for unleaded gasoline at the pump climbed about 19 percent so far this year to $3.90 a gallon yesterday, according to AAA data.

To contact the reporters on this story: Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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