Highway bill assumes huge jump in oil prices

Highway bill assumes huge jump in oil prices
© Getty Images

The Senate highway bill unveiled Tuesday assumes that crude oil prices will rise by nearly 90 percent in the next 10 years in order to raise money for infrastructure.

The bill, introduced Tuesday afternoon, proposes selling oil from the federal government’s Strategic Petroleum Reserve. It’s the result of a deal hashed out by Senate Majority Leader Mitch McConnellMitch McConnellMeet Trump's secret weapon on infrastructure Senate confirms first nominees of Trump era The new Washington elite schmoozes over lunch MORE (R-Ky.) and Sen. Barbara BoxerBarbara BoxerFeinstein to hold campaign fundraisers, a hint she'll run again Becerra formally nominated for Calif. attorney general 10 freshmen to watch in the new Congress MORE (D-Calif.).

ADVERTISEMENT
Lawmakers project that selling 101 million barrels from the 693-million-barrel stockpile would raise $9 billion if the federal government sells the oil between 2018 and 2025. In the bill, the price of crude oil is estimated to average $89.10 per barrel.

But crude oil prices settled at $50.68 at the end of the trading day Tuesday on the New York Mercantile Exchange, far below what would be needed to hit the $9 billion mark.

The Senate’s forecast would have been less of a leap as recently as 2014, when oil traded for more than $100 per barrel for much of the first half of the year.

But a global glut in oil supply, combined with anemic demand, caused oil prices to crash last year, and they have yet to recover.

The oil sales ares one of numerous creative provisions that the bill uses to fund infrastructure without raising the gas tax, which has historically been the main source of funding for federal highway programs.

Other offsets include tweaks to Social Security, payments the Federal Reserve makes to banks and customs fees.

Sens. Lisa MurkowskiLisa MurkowskiWhat we learned from Rick Perry's confirmation hearing Perry regrets saying he would abolish Energy Department Trump education pick to face Warren, Sanders MORE (R-Alaska) and Maria CantwellMaria CantwellIn Energy hearing, Rick Perry capitulated to Big Gov on all fronts What we learned from Rick Perry's confirmation hearing Perry regrets saying he would abolish Energy Department MORE (D-Wash.) said they oppose any sales from the oil stockpile that are not used to pay for energy security or related purposes, a position with which the White House agrees.

The Energy Information Administration (EIA) predicts that prices will rise slowly in the coming years, but not enough to meet the Senate’s needs.

In the EIA’s latest forecast, released in February, it said that oil will average $76.25 in 2018, and rise to $91.13 by 2025.

The Senate failed Tuesday to pass a procedural vote to move forward on consideration of the legislation.