If America has an "oil reserve"; why don't we use it and drop the price of gas?

Question

Like a lot of people, I think the price we pay is outrageous.

I also think it's a criminal monopoly to continually raise prices without any appearant control over how high those prices grow.

I heard an oil executive bemoan that they only earn a few cents on the gallon and I'm trying to figure out how it is that the everything else in the process becomes so expensive that they can't fix it without raising prices to the detriment of the consumer.

Answer 1

About 3 weeks ago Bush had the stockpiling stopped so there is more oil out there..besides financial annalists have said the release of the oil in stock would only drop the prices maybe  5 cents for a few weeks.

Answer 2

You ask two separate but related questions.

The second one has a shorter answer. Oil companies are really not fully in control of crude oil prices because they generally produce very little of the crude oil that the US uses. BP-Amoco, ExxonMobil, and the others all own refineries, but they have to buy most of the crude that is refined there. Also, crude isn't only refined into gasoline, but also into kerosene, diesel and other petroleum derivatives. US-based companies can extract about 5 million barrels/day of crude oil, which is roughly 1/4th of what we consume. The rest has to be imported - often from state-owned extractors such as OPEC, or foreign companies. Thus, when the price of the crude that they buy goes up, the price they make the distributor pay goes up.

That's right - once the crude is refined into gasoline, it doesn't go to the pump yet, but to a distributor, either via a pipeline or through tankers to a central site. The distributor then wholesales the gasoline and diesel to local retailers who are often sole proprietors of gas stations. Only then do you finally get to buy the gas.

The only place we can realistically limit the price is at the production level, namely where OPEC and other extractors reside. Short of buying less, we have no ability to control this price, though it does often feel like OPEC is wielding their oil weapon against us.

Now for your first question:

The Strategic Petroleum Reserve was started when OPEC began to flex its power as a means of keeping an emergency amount for civilian use to mitigate wild price fluctuations (or, what was seen as wild in 1975). It has been dipped into a few times, notably during Desert Storm and when there had been pipeline blockages in US production (we do produce about 1/4th of our own daily consumption).

Currently, the reserves hold 700 million barrels of petroleum, and can pump out 4.4 million barrels per day.

In 2006, we consumed 20.7 million barrels of oil per day, so opening the spigots would take care of about 1/5th of our consumption for 160 days. And then its gone. But it won't hit the pumps for some time because this petroleum still needs to be refined into usable products such as gasoline and diesel.

When Bush ordered that we cease stockpiling oil, that won't help much - we were only putting about 70,000 barrels a day into the reserves, less than 1% of daily consumption.

I'm personally against tapping the SPR because it is a short-term solution to a long-term problem. If we make gasoline cheaper, consumers won't change their habits - and the only real solution is to reduce consumption, whether through efficiency or through cutting back. Plus, the SPR is much more useful if, say, there's a major pipeline explosion and we won't have any oil coming from Canada (our largest importer) for the next six months. The SPR would help alleviate the $15/gallon gas we'd see in that instance.

Answer 3

Because we don't wanna use it.

The reason gas is so high is because the value of the dollar is down. As long as they stop making paper bills it should lower it some.

Answer 4

IT IS THE DEMOCRATS IN CONGRESSSS!!!!!!!!!!!

THEY WANT TO PROTECT THE INNOCENT ENVIROMENT.

COME ON,

THE UNITED STATES HAS OVER 1.3 TRILLION BARRELLS OF OIL IN ITS RESERVES

BUT YOU CAN ALL THANK THE DEMOCRATS IN CONGRESS FOR THESE HIGH OIL PRICES

I JUST LOVE DEMOCRATS.

THEY JUST CARE SO MUCH ABOUT THE AMERICAN PEOPLE.

Answer 5

I was told that we save our oil reserve that just incase the oil companies over seas stop supplying us, we have back up that will last us for a while.  So we probably wont be getting oil from our own supply as long as we are still buying from other countries.