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Oil prices have been rising constantly all summer, and now that the first cold snap has hit New England, those prices will begin to effect consumers heating their homes in the winter. In order to lower prices for oil, President Clinton announced Friday that he would release 30 billion barrels of oil from the oil reserves. While a genuine effort on the part of Clinton to address the needs of consumers facing the prospect of a cold winter and unaffordable heating oil is laudable, the administration's short-term solution may not work, and the voicing of similar concerns by Vice President Al Gore 69 seems little more than political pandering.
Last winter, when the administration was also faced with high prices and oil shortages in the Northeast, Gore was against the release of reserve barrels. And while oil prices are higher this year, and the shortages more dramatic--there are only 4 million barrels of oil in New England this fall as compared with 14 million last fall--the economic fundamentals remain the same. Flooding the market with barrels from the U.S. reserves may not do anything to lower prices in either the short or long run.
The Organization of Petroleum Exporting Countries (OPEC) may simply lower supply in order to keep the prices high (they meet in Venezuela next week) as Gore argued this time last year, or oil companies could simply keep prices high to increase their profits. Furthermore, even if the plan succeeds at lowering oil prices, it will lower prices on all oil products, not just heating oil. This means that prices at the pump--which are justifiably high given the negative effects of smog and other environmental effects of auto pollution--will fall along with heating oil. This means that SUV and luxury car drivers--people who burn a lot of fuel for no good reason--will benefit as much as poor and middle-class families trying to heat their houses this winter.
The oil shortage is simply more complicated than simple supply and demand. Most OPEC countries are already producing at full capacity, trying to catch up with after decreasing production in line with the 1997 financial crisis. There is a worldwide oil shortage, and America is feeling the effects far less than most countries. America has the lowest gas prices in the world except for the United Arab Emirates. Any more shocks to oil production--such as aggression by Saddam Hussein, cuts in production by Iraq or other OPEC member nations, or natural disaster--could lead to a full-blown oil crisis reminiscent of the 70s.
Gore's other proposals to alleviate the winter oil shortage are actually better suited to a situation where the U.S. has little control over oil prices. Gore has proposed creating a permanent home heating oil reserve to protect consumers against supply shocks, as well as a subsidy for low-income families for heating oil. These proposals are more likely to benefit those most likely to suffer from the high prices this winter.
However, what is most important is that the next administration creates a long-term plan to make the United States less dependent on oil for energy. In this area Gore actually has the upper hand, having already committed himself to funding clean, reliable sources of energy if elected. Bush has criticized Clinton's decision, calling it a threat to national security, as well as an inadequate long-term solution. However, Bush's plan to decrease oil prices is simply for the United States to produce more oil, in part by opening up the currently protected Arctic Wildlife Refuge to drilling. Not only is Bush wrong on national security--the Pentagon told the administration that the release wouldn't jeopardize military effectiveness and the oil companies will replenish the reserves in the next two months--but he would also trade environmental protection for lower oil prices.
The fact is, heating bills will be at least 30 percent higher this winter than last, according to the Energy Department. While the release of the reserve barrels may help to bring the cost down in the short term the next administration should have a plan for developing alternatives to oil that don't jeopardize our precious natural resources that exist in the form of wildlife refuges.
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