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5/21/2004 03:14:00 PM | Dan

Energy Policy Blinders

There's been a lot of debate lately about releasing the Strategic Petroleum Reserve to lower record gas prices. Democrats (Kerry included) have blamed the high prices in part on Bush's refusal to release portions of the reserve. There is a legitimate argument to be made that releasing SPR oil would have a neglible impact on price (not to mention the fact that expensive gas shouldn't actually constitute a national emergency).

WA PO's Charles Krauthammer writes:
The SPR is there for some catastrophic event, say a terrorist insurgency in Saudi Arabia that interrupts supply and could wreck the U.S. economy.

The fact is that the SPR is disturbingly small. According to its website, "In the event of an energy emergency, SPR oil would be distributed by competitive sale." [i.e. an auction]. The SPR is currently at around 650 million barrels which would provide import protection for 53 days. So after around eight weeks we would be totally screwed. I guess that might give us time to negotiate some kind of deal with other oil-rich allies, but this really is rather risky.

Krauthammer's solution:
The idea is for the government -- through a tax -- to establish a new floor for gasoline, say $3 a gallon. If the world price were to rise above $3, the tax would be zero. What we need is anything that will act as a brake on consumption. Since America consumes 45 percent of the world's gasoline, a significant reduction here would bring down the world price.

Additionally, Kerry should propose that the first several thousand dollars of gas expenditures should be refunded to lower income Americans who really don't have the wherewithal to trade in the old Ford for a new hybrid Honda.



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