Government Actions Could Lower Oil Prices

As of February 2008, crude oil costs (69%) and taxes (13%) accounted for 82% of gasoline pump prices.

In a previous post we described actions that consumers could take to lower fuel costs. This commentary suggests some actions the government could take now to help lower pump prices.

1. Stop buying crude oil to fill the Strategic Petroleum Reserve – Since January 2007, 11.8 million barrels of crude oil have been added to the reserve. The 1.8% increase in storage capacity may seem small, but any purchases add to OPEC demand. Current and future market prices of crude oil are influenced by small changes in supply and demand.

2. Reduce highway speed limits – Lowering the speed limit could improve fuel economy by 15-20%.

3. Ease environmental restrictions – A pretty controversial step, but allowing winter season vapor pressure levels in gasoline could reduce crude oil demand by allowing more butane from natural gas production to be blended into gasoline.

4. Curtailing government travel – The Federal government could force a mandatory reduction in travel by government employees.

We don’t support reducing tax levels or Federal regulations of the marketplace.

Sources: Gasoline and Diesel Fuel Update