Acknowledging they wouldn't agree on a long-term federal transportation package before the Friday deadline, congressional leaders agreed Tuesday to vote on a three-month, $8 billion stopgap that will keep highway projects moving. Passage of the bill on Wednesday through both chambers seems assured.
It's good they didn't jump on the most recent Senate proposal, a $350 billion transportation bill. To fund that bill, one of the ideas under serious consideration was to sell 101 million barrels of oil out of the Strategic Petroleum Reserve. This would be a big portion of the 700 million barrel SPR, more than all the previous drawdowns combined.
When I first heard about the proposal I thought it sounded so asinine that it would vanish in a couple days and we wouldn't hear about it again. But it didn't go away, and now in a couple months Congress might actually consider the plan.
Both Lisa Murkowski, the Republican chair of the Senate Energy Committee and Maria Cantwell, her Democrat counterpart, oppose the idea. Murkowski describes it as akin to "cashing in our home insurance policy to pay for repaving the driveway."
Secretary of Energy Ernie Moniz said the concept of selling off energy assets to pay for ongoing expenses was a "slippery slope."
And, of course, the timing couldn't be worse. The United States has a glut of oil. West Texas Intermediate crude closed today at $47.72 a barrel. At this price selling 101 million barrels would only fetch $5 billion. That's not going to repair many highways.
China appears to be a little smarter than we are. It is currently taking advantage of low oil prices to build up its own strategic oil reserves, from 300 million barrels now to about 600 million at the end of the decade.
Another rational idea: how about the Federal Highway Administration limit the projects it funds to whatever it can afford within the constraints of its gas tax receipts? If the feds run out of money, then the states should fill in the gap. And if the states need more highway money, let them hike their own gas taxes. (New York has the highest gas tax at 68.5 cents per gallon.)
According to the Congressional Budget Office, public-sector spending highways amounts to about $150 billion a year. State and local governments already put up 75% of that. I'd rather the gas taxes I pay in Texas stay in Texas.
If Congress does end up tapping the SPR to pay for highways, those extra barrels on the market would directly damage America's oil drillers, by further driving down the price of domestic oil. It would simultaneously help American refiners, which are already enjoying this time in the cycle when they can buy ever cheaper oil while keeping their gasoline and diesel prices up as high as the market will bear.
A good tradeoff: go ahead with an SPR drawdown, but at the same time repeal the outdated ban on crude oil exports, so we can relieve the glut and help get American oil companies back to developing our true strategic petroleum resources -- oil still in the ground, and the know-how to get it out.
