With a barrel of oil now costing a little over $100 a barrel and the price of gasoline approaching $4.00 per gallon, the American people are starting to grumble. While it is highly unlikely that there will be mass demonstrations in the streets, the political implications associated with such unusually high prices has forced the White House and President Obama to address the issue.
The subject of releasing some oil from the strategic reserves tends to be the first thing to come up when gasoline prices start to spike higher. Obama is no different from any other politician in that he must do what he can to assuage both the Democrats and Republicans that he serves. Oil reserves are at an all time high, practically overflowing their holding tanks. Many people think that by releasing a few million gallons, the price at the pump will drop.
When the United States began hoarding oil back in the 1970s, the stated purpose was to ensure that the supply would not be disrupted in the event of some hostile action or natural disaster. Oil reserves were released back during the first Gulf War and also in the aftermath of Hurricane Katrina. In both instances, supply and not demand was the issue.
Today, we have more than enough supply of worldwide oil. It is the political events and the large speculators that are driving the price through the roof. This is a regular occurrence in the oil industry. OPEC, oil companies and speculators seize the opportunity to raise prices whenever the political and economic conditions will allow it.
If the President does release some oil reserves, initially, the price at the pump will drop. It will be more of a psychological drop that a drop because of added supply. Until the economy improves more and the world becomes politically more stable, oil prices will probably stay at or above $100 per barrel. Higher prices means alternative energy becomes more attractive. Obama wants America to use renewable, clean energy and will do little to put pressure on the price of oil.
We will just have to wait and see which way the pendulum will swing. In the mean time, everybody should do their part to conserve energy. The less fuel Americans use, the quicker the cost of filling up will go down.