Up to the minute Amber Alert Information

Wednesday, May 21, 2008

Political Bluster

Helpful politician, Jeremy Kalin (D-17B), declared that he was writing to Congress to ask them to stop pumping oil into the Strategic Oil Reserve in order to reduce the price of gasoline.

Well, Kalin got his wish even if he did not influence it. Congress has passed legislation to stop buying oil to pump into the reserve. The current contract will expire in July.

The oil reserve currently holds 701,000,000 barrels. At the rate of adding 76,000 barrels/day, it has taken 9,224 days (25 years, starting in the 1970s) to fill the reserve to 97% capacity.

The oil consumption in the US is about 21,000,000 barrels per day (here and here: somewhat dated figures). That gives about 33 day’s supply of oil if the US could not buy foreign oil or pump any domestic oil. That is a small reserve. It is called the Strategic Oil Reserve for a reason.

Diverting 76,000 barrels per day from the strategic oil reserve to consumption is supposed to reduce the cost of gasoline by a few cents per gallon according to Kalin. One article above says it ". . . might help lower the price of gasoline."

President Bush has argued ". . . that such a relatively small amount of oil would not influence prices." Indeed, the President is correct because the oil that has been stockpiled per day is only 0.36% of the total oil consumed in the US per day.

Let’s assume the extra fuel actually helps reduce the cost of gasoline. Let’s assume each $3.75 gallon of gasoline is lowered by the 0.36% extra fuel. That would save 1.3 cents per gallon ($3.75 x 0.36%, best case scenario).

That’s not going to help much. But politicians, whether in the US Congress or a Minnesota Representative like Kalin, just have to "do something." After all, it all depends on them. They will help us. Neither the news media nor Kalin will do the math to show the above to present to their readers or constituents. If Kalin would, his declaration of help would be viewed as absolutely insignificant and meaningless. Leaving all the hard numbers out of view, he can come off as the helping, beneficent hand. His view and letter did no more to drop the cost of gasoline than the disinterest of my ninety year old aunt. But gullible people will think he has done a great service.

No comments: