Obama urged to open U.S. oil reserve
TEXT OF STORY
STEVE CHIOTAKIS: Oil prices are hovering just above $103 a barrel in futures trading today. And now some members of Congress have jumped back on the bandwagon asking President Obama to open the nation’s strategic oil reserve. Advocates say doing so would bring down the price of gasoline — right now at $3.60 or more in California and other parts of the west.
Severin Borenstein is with the Energy Institute over at the University of California Berkeley and he’s with us right now. Good morning, sir.
SEVERIN BORENSTEIN: Good morning.
CHIOTAKIS: The administration’s expressed a little trepidation when it comes to opening up the oil reserve. Why do you think that is?
BORENSTEIN: Well, I think there’s some real concern about starting to tap the oil reserve when prices are high but we’re not seeing major disruptions in the oil market. The reason for having a strategic petroleum reserve is to be able to respond in case there is a significant change in the flow of oil. Although we’ve seen some production go offline, it’s a pretty small part of the oil wold market so far.
CHIOTAKIS: What would happen if we tapped into those reserves right now?
BORENSTEIN: Well the price of oil would fall a bit — probably driving down gas prices 5 or 10 cents a gallon, but it wouldn’t have a major impact on the oil market because what we would release would still be a small of that world oil market. At this point I think there’s a lot of uncertainty, and the oil markets are reflecting that. There is a possibility that Libya will calm down fairly quickly, in which case oil prices would almost certainly fall quite a bit. There’s also a possibility that it could spread, and in order to predict the price of oil at this point you need to be able to predict the political upheaval in the Middle East, and no one seems to be very good at that.
CHIOTAKIS: I’m curious, Severin, because Libya produces — I mean it’s a pretty small percentage, right, of the world’s oil. But these prices are going really high really fast so I mean what’s to blame for this?
BORENSTEIN: I think the oil market’s reflecting the real risk that this could spread.
CHIOTAKIS: Well you say risk right? Risk — are we talking about speculators?
BORENSTEIN: Certainly speculators get in the market, and buy and sell depending on what they think is going to happen. That’s not a problem that’s actually helping the market reflect real risks that are out there. I don’t think the concern that’s sometimes voiced that it’s speculators that are causing the high prices is really accurate. What’s causing the high prices is real concern that we could have a disruption in teh oil market.
CHIOTAKIS: Severin Borenstein, co-director of the Energy Institute over at the UC Berkeley. Thank you.
BORENSTEIN: Thank you.
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