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Fuel Prices on the Rise

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With gasoline prices at the pump climbing strongly into the $2 slot, many people are becoming concerned about how high they may go, and what Congress should do about it, if anything. Petroleum prices effect the pricing of so many other products. Most of the items bought by consumers have been trucked some distance from a factory, to a warehouse, to a retail store. Consumer transportation, home heating, and electricity can also be adversely affected by rising fuel costs.

Besides capped oil wells and vast reserves in Alaska, the United States maintains a petroleum storage called the “U.S. Strategic Petroleum Reserve”. This government-owned stockpile of crude oil is stored away in a series of salt domes in Texas and Louisiana. Current records show the reserves to be holding 700 million barrels of crude. These reserves are held for national emergencies or during wartime efforts. A significant amount was withdrawn from these reserves during Desert Storm in 1990. As of late, the Bush Administration has been topping off these large salt caverns with crude, even as the price was on the rise.

Unfortunately, these vast reserves are only a drop in the barrel when compared with the United States domestic demand. Presently at 20 million barrels per day, the United States could completely drain this reserve in just 35 days. Of course, every country on the globe uses petroleum. Global demand is now at about 82 million barrels per day, and rising each year by about 2 million barrels per day. The Energy Information Administration website estimates total global reserves of petroleum at approximately 1.2 trillion barrels. It is unclear from the report viewed for this article as to whether this is a report of all known crude on the planet, or just the crude of developed sites. If it is an estimate of all known crude, than at current global usage---without increases in use--- this indicates that 39-1/2 years of crude remains.

Some in U.S. Congress have been pushing the agenda to begin drilling in the Alaskan Wildlife Refuge. On March 16, a closely divided senate voted in favor to open Alaska’s Arctic National Wildlife Refuge to oil drilling, moving the country one step closer to opening the Alaskan crude reserves. Experts estimate that the billions of barrels of oil beneath the 1.5 million-acre coastal plain can be extracted from key positions so as to cause minimal interruption to the surrounding area. Many political hurdles must be passed before drilling would be permissible. After committee reviews, the Senate and House both still must pass the final version of the proposal. Experts estimate that it would take 7 to 10 years of development before oil would be pumping from the ground.

Opponents argue that the volume of Alaskan oil will be insignificant to control petroleum prices, or to substantially reduce our dependence on foreign oil. Government models forecast that oil companies would be able to pump nearly 1 million barrels of oil per day from the Alaskan Refuge by the year 2025. At present U.S. demand, that represents 5% of daily consumption.

According to the Energy Information Administration website, the Middle East crude reserves account for 57% of global supply. The North American continent holds about 17%. The remaining 26% of supplies are somewhat evenly split around the globe, with the smallest volumes being in Asia and Western Europe, where crude demand is quite high. Much of the developed world relies on imported crude.

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