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’s 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).
Congress created the SPR in 1975 as a result of the oil embargo and as a way to ensure the U.S. had a supply of oil in an emergency. 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.
But SPR was created when the U.S. had passed its so-called peak oil production in the early ‘70s, and it appeared that we would be increasingly dependent on foreign oil.
However, 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.
Thus, the domestic oil and gas industry will soon be able to meet U.S. needs, and maybe those of our allies, especially if a more energy-friendly administration allows more drilling on federal lands and offshore and Congress removes the crude oil export ban.
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.
The U.S. energy revival should force Congress to rethink some of its outdated policies, beginning with the Strategic Petroleum Reserve.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.
June 24, 2015