Along with uncertainty in the Middle East, the cost of gas has also clearly been affected by rampant speculation in the oil market. Last year, at the peak of the last oil price bubble, Goldman Sachs estimated that speculators increased crude prices by around 20 percent. Even the head of Exxon Mobil conceded that the price of oil should have been “in the $60 to $70 range,” when it instead hovered around $100 a barrel.
As presidents on both sides of the aisle can attest, even releasing a small amount of oil from the reserve can have a huge impact on the price. When President George H. W. Bush deployed oil from the SPR in 1991, oil prices immediately dropped by more than 33 percent. When President Clinton exchanged oil from the SPR in 2000, it again drove prices down by nearly 19 percent. And when President Bush released oil from the reserve in 2005 following Hurricane Katrina, oil prices fell by more than 9 percent.
Recent history points to the success of this strategy as well. Last year, when President Obama directed the release of 30 million barrels of oil from the SPR - less than 5 percent of the reserve – in conjunction with the release of an additional 30 million barrels from our international partners, prices declined by 8 percent. And on March 15th, the Wall Street Journal reported that U.S. crude oil futures dropped by as much as $1.58 per barrel in reaction to a Reuters report suggesting that President Obama and British Prime Minister David Cameron had reached agreement on a plan to release oil from both countries’ national oil reserves. After government officials denied that any such agreement was imminent, oil futures prices quickly rebounded.
Right now, the Strategic Petroleum Reserve holds approximately 696 million barrels and is filled to more than 95 percent of its capacity. Releasing even a small fraction of that oil could again have a significant impact on speculation in the marketplace and on prices. It would remind the markets that the United States is ready to employ an aggressive and effective SPR drawdown policy if needed. And it would send a strong signal to oil markets responding to the unrest in the Middle East. I urge the President to take this stand for American families, and to use his power over the SPR to help combat speculation and reduce pain at the pump.