How to reduce the price of Oil by 20% immediately

UPDATE:

In thinking about this more, let’s kill several birds with one barrel. Or more specifically, how about we (the government) sell the oil to the oil companies at below market rates instead. After all, this was an investment the government made with our money, and for once it actually had a return. Unlike almost all other ’savings’ plans administered by the bureacracy. The overall average cost per barrel of the Strategic Petroleum Reserve is $24. Wow, $24.

So, as a mechanism to increase the supply of non-foreign imported oil, we release 50% of the reserve over the summer as stated below. We do this by selling it to US oil companies at a rate of say $75 per barrel. Whether we like it or not the existing oil companies have the distribution network, it has to get into their hands at some point. Conditions to place on this oil are that the ’standard’ mark up is in place all the way down the distribution chain. Those numbers look something like this:  9% for distribution, 19% for profit and refining costs, 19% in taxes, and the rest, 53% for the cost of the oil.  No profit above and beyond the current mark ups. This would ensure that the gasoline price would come down at the pump.

The proceeds from this sale would net the government around 15B dollars. This should be set aside for some of the ideas listed below, such as the Conservation Corps. I am sure we can come up with other ways to use this oil dividend.

UPDATE END:

Remember the strategic oil reserve that the US has been buidling since 1975? Yes, in three hidden locations around the US, we have 700 million barrels of oil stockpiled for whatever emergencies await us from terrorists, OPEC shortages, or natural disaster. A bill in front of congress will add an additonal 350 million barrels by 2009. Do ya think that might drive up demand for oil and the price also… I must have gone to another economics class in college.

700 million barrels, we add about 100k barrels a day to the reserve from a total worldwide consumption of 82M barrels a day, so that is not the real answer. We should stop buying just to save the money. The government has spent over 20 billion on this initiative, since it’s conception.

John McCain’s plan to help you this summer is with a tax holiday by eliminating the federal gasoline tax during the summer. The fed tax on gasoline is around 18 cents or 5% reduction. OK, big whoop.

My plan is to release some of this reserve. Shake up the petty dictators and lower prices. Some ever larger percent of the $115 for a barrel is speculative BS from the market. Oh, China is growing, India, we all need oil, we all want oil. Well how about if we didn’t need as much for a few months, what would happen then. Last time we released reserves was in late 2000, about 30 million barrels. The price of gas fell 20%.

Ok, so let’s do it again. The US consumes 20 million barrels a day, about half of which is imported. The Strategic reserve estimates is can release 4.5 million barrels per day. So, let’s do that for the summer instead of the fed tax relief. Let’s release 4.5M barrels per day for 12 weeks for a total reduction of 378M from the reserve or cutting it in half.

So I am proposing reducing our imports from foreign countries for three months by %50. Do you think they would notice ? Do you think Wall Street would react favorably ? Remember we the taxpayers already paid for this, isn’t this a good time to use it? Yes, Yes, Yes.

Let’s shake it up. No more sissy ideas of tweaking around the edges. Bold ideas, Bold decisons.