Friday, July 03, 2015

Highway Fund Empty : Petroleum Reserve Sell Off

The first question that should be answered is why is the highway fund empty in the first place? Did someone sneak in there and take the funds for other purposes? But no matter, we have to have to find more money to spend while never giving any thought to finding ways not to spend more money, especially since we are broke.

Where is the commons sense?

Can the Petroleum Reserve Fund Our Highways?
Source: Merrill Matthews, "Let the Strategic Petroleum Reserve Fund Our Highways," Institute for Policy Innovation, June 24, 2015.

June 25, 2015

The federal Highway Fund is about to run out of money, and so lawmakers are scrambling to find more funds. Some Republicans have reasonably proposed funding the program through corporate tax reform — specifically, lowering the tax burden on the offshore profits of U.S. companies if they "repatriate" those funds.
But others see the highway-funding shortfall as an opportunity to ding companies for even more tax money — an approach that likely won't pass Republican opposition. While corporate tax reform is needed, there is little chance of doing that by July 31, when the Highway Fund hits empty. So how about a short-term fix that could provide funds quickly and in the long run actually save the government (i.e., taxpayers) money?
That solution?  Sell off part or all of the crude oil reserves in the Strategic Petroleum Reserve (SPR).
  • About 727 million barrels of crude oil can be stored at four different sites. While levels can vary, the feds usually keep around 700 million barrels in reserve.
  • The government has sold portions of the SPR many times over the years, especially as a way to lower oil prices when they are high. It eventually replaces those barrels when prices drop again.
  • Thanks to innovative drilling techniques, U.S. oil production has been rising for several years, and the U.S. may become a net oil exporter within the next few years. Those changes have made the SPR an anachronism.
The U.S. energy revival should force Congress to rethink some of its outdated policies, beginning with the Strategic Petroleum Reserve. Let SPR, not taxpayers (corporate or individual), finance the Highway Fund.

How much could the U.S. make from the sale of the reserves? About $35 billion, based on $50 a barrel; but the selloff should be done slowly to keep from tanking oil prices more than they have.


No comments: