Political instability and unrest in the Middle East has and will continue to play a major role in rising gasoline prices. Pump prices have risen by an average of 33 cents across the United States in the past two weeks, and future uprisings in Arab nations could mean serious trouble for a society dependent on oil.
Since protests and chaos began in Libya, the world’s 12th largest oil-exporter, the country’s normal oil production of 1.6 million barrels a day has dropped by almost two-thirds. Oil companies and even a Wall Street Bank have stopped trading crude with Libya in response to sanctions against the country.
But if Libya is the 12th-largest exporter, what will happen if turmoil reaches Saudi Arabia? Peter Beutel of energy risk management firm Cameron Hanover says of Saudi Arabia, “If anything happens there, we’re talking about prices going to some number that’s unthinkable.”
There have been a number of small uprisings in the Eastern Province where the majority of the country’s crude is located. A ‘Day of Rage’ is planned for March 11 amidst threats from authorities that any protests, no matter how peaceful, are banned throughout the nation.
At $105 per barrel, oil prices are up 29% from a year ago, and Democratic lawmakers have begun to urge President Obama to tap into our nation’s 727 million barrels of Strategic Petroleum Reserve in an attempt to fight short-term spikes in oil prices. The reserve translates into 60 days of total U.S. oil imports, however some argue whether the current situation constitues a “severe energy supply interruption”, which is what the reserve was established for under the Energy Policy and Conservation Act of 1975.
According to a recent article in the Washington Post, a “severe energy supply interruption is defined as one which 1) “is, or is likely to be, of significant scope and duration, and of an emergency nature”; 2) “may cause major adverse impact on national safety or the national economy” (including a spike in oil prices); and 3) “results, or is likely to result, from an interruption in the supply of imported petroleum products, or from sabotage or an act of God.”
On Monday, White House Chief of Staff William Daley said of the Obama administration, “the issue of the reserve is one we’re considering.” He went on to add that while everyone acknowledges the uncertainty in the Middle East, tapping into the reserve is something that has only been done in very rare occasions.
Watch the following PBS News Hour video to hear what experts have to say on tapping into the SPR.