The Air Transport Association of America is pulling out all the stops this summer on Capitol Hill to reduce the price of fuel.
First, the industry trade organization urged Congress to pass legislation to curb oil speculation. Now ATA wants the government to release 10 percent of the Strategic Petroleum Reserve.
"History has shown that a temporary increase in supply will help lower prices," said ATA President and CEO James C. May, in testimony before the House Select Committee on Energy Independence and Global Warming.
May told the Committee that jet fuel is costing as much as $30 per barrel more than gasoline, as of mid-summer.
May provided an outline for the SPR release: follow an unannounced release schedule; release light, sweet crude oil first; restore United States commercial inventories to previous year's levels; dedicate revenue from the sale of SPR barrels to developing alternative energy sources; and have Congress set up a framework or trigger for continued use of the SPR when warranted.
Not everyone believes tapping the SPR will do much good. "The total reserve only accounts for around 36 days of consumption in the U.S. and any release of the oil is purely psychological and will have a minimum impact on the price of oil," said Vaughn Cordle, chief analyst with AirlineForecasts.
But others back ATA's proposal. "History shows that strategically released oil from the SPR is good policy and can have an immediately beneficial impact on crude oil and petroleum product prices," said Kyle Simpson, policy director with Brownstein, Hyatt, Farber and Schreck, who testified before the same committee.
He cited as an example the release of oil following the first Gulf War and after Hurricane Katrina in 2005.
However, tapping the SPR once again may not be necessary if the oil prices continue to drop. As of July 23, oil prices dropped below $125 per barrel for the first time since early summer.
The SPR has over 700 million barrels of oil and the U.S. consumes 7.3 billion per year, 21 million barrels per day, said AirlineForecasts and a 777 Captain for United Airlines.
The consultancy attributes the high fuel price to several factors, including the weak U.S. dollar, increased consumption of fuel by China and other developing nations as well as political unrest in oil producing nations. In addition, a lot of oil comes from non- Organization of Petroleum Exporting Countries and the wells are past their prime and the infrastructure is crumbling, said Cordle.
Robert W. Moorman
