I was disheartened this weekend to hear that the administration is considering tapping the strategic oil reserve to, in their words, “Help ease soaring oil prices’. I’m not so naive to believe oil prices aren’t important to economic factors in the US. High oil prices, which translate into hire gasoline prices, essentially act as a tax on the economy. It’s a somewhat regressive tax as well, so naturally, politicians aren’t keen on seeing prices at the pump increase at all. But at what cost?
Strategic Oil Reserve was Meant for “Emergencies”
The reserve was started after oil supplies were cut off during the 1973-1974 embargo. As of the latest inventory report, the reserve was holding about 727 Million Barrels of oil, which seems like a heck of a lot, but only equates to about a month’s worth of oil consumption in the US. Since the drawdown is capped at 4.4 million barrels per day, it could be fully depleted across a period of about 5-6 months. According to its charter, tapping the reserve is meant to be for “countering a severe supply disruption”. $100 oil prices is anything but. There is no mention whatsoever of anyone cutting off supply to anyone. Since oil is fungible and perhaps the most efficient traded commodity on the planet, mere mention of such a scenario is silly. What this is really about is politics.
Oil Prices are Important to the Left, As Long as No War is Tied to It
It’s ironic how the left had always criticized both gulf wars and even Afghanistan as somehow the US trying to exert their imperial influence over the middle east to control oil prices, yet now we’re seeing a consideration of depleting our own reserves to prevent gas prices from reaching $4. Let’s just all admit it – oil prices matter!
My concern isn’t so much the hypocrisy or the politics, but rather, the implications of drawing down our reserves during a time of no emergency such that there are no reserves to draw on when there IS an emergency. You think the US has lost clout and leverage in the world today? Imagine the US in 2012. An election year with $5 gas and no strategic reserves. What kind of wheeling and dealing do you think we’ll be undertaking then?
For some additional irony, during Bush’s tenure, he sought to double the capacity of the Strategic Reserve, but guess what happened? Dems instituted a measure to block the purchases, which was eventually passed (see the measure and the votes here – all 24 votes against were Republican). So, what I’m waiting for, is when and if Obama depletes the reserve and we end up with $5 gas anyway, if he can blame Bush for this. Or if he’ll actually look to Pelosi and the Dems. Should be interesting.
What Are Your Thoughts?
Should We Tap the Reserve? Or Await a True Emergency?
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