Strategic Oil Reserve or Short-Term Political Maneuver?: View
Releasing oil from the Strategic Petroleum Reserve makes sense in time of emergency, natural disaster or a major disruption in supplies. None of those events have occurred, which makes the yesterday by President Barack Obama to tap the reserve puzzling.
Obama, in concert with the International Energy Agency, plans to draw 2 million barrel a day during the next month from U.S. and international reserves. Oil prices plunged.
Perhaps that was the desired effect. The argument offered by Obama and IEA officials was that the released oil would offset the reduced supply of crude from Libya. The release also coincides, the Department of Energy said, with the onset of the peak U.S. summer driving season.
But amid a run of gloomy economic news, it’s hard not to imagine that other motives were at work. The Federal Reserve on Wednesday lowered its growth forecast for the year. Unemployment is heading in the wrong direction. The U.S. housing market still is in decline.
This is only the fourth time since the petroleum reserve was established after the mid-1970s oil crisis that a U.S. president has tapped it. The others were in 1991 during the first Gulf War; in 1996-97 to help reduce the federal deficit; and in 2005, after Hurricane Katrina knocked out drilling rigs across the Gulf of Mexico.
Over the years Congress has adopted rules making it easier for the president to release oil at times of high prices. But with crude at about $95 a barrel before the announcement -- well below the record of $147 in 2008 -- that hardly seemed to be the case.
What’s confounding about the reserve release is that it doesn’t seem to meet the president’s professed standards. “The reserve should only be used in the event of an emergency,” Obama said in 2005. Unless the administration can make a persuasive case that disaster lurks, we will be compelled to face a situation more corrosive than rising gas prices or the lack of a comprehensive energy policy -- the sense that our leaders are making short-sighted decisions for political gain.
To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at email@example.com.