President Biden released 180 million barrels of oil from the Strategic Petroleum Reserve in the months leading up to the midterm elections, with little demonstrable impact on prices at the pump.
While it might have provided the president a sound bite or two, 180 million barrels represent only two days of world oil demand, a tiny ripple in the global oil supply-demand balance that determines the price. [emphasis, links added]
More important is the risk he is creating for American energy supplies in the event of a genuine global supply crisis.
Among the possibilities: a war with China over Taiwan, a decision by Russia to curtail oil sales to Europe and the U.S. to try and force an end to their support of Ukraine, or a conflict between Iran and Saudi Arabia, the world’s largest oil producer.
I was a participant in the legislative effort to produce the Energy Policy and Conservation Act of 1975, which authorized the reserve’s construction, and I am amazed that so few in Washington and the press have objected to Mr. Biden’s misuse of the reserve in an apparent attempt to influence an election.
The reserve was created after the 1973 Arab oil embargo. Its purpose was to “diminish the vulnerability of the United States to the effects of a severe energy supply interruption, and provide limited protection from the short-term consequences of interruptions in supplies of petroleum products,” not manipulate oil prices.
The Senate and House conferees assured President Gerald Ford of that intent when they sent him the bill for his signature.
Ford supported the reserve and approved it over strong objections of some of his senior advisers, particularly Treasury Secretary William Simon, who had served as energy czar during the oil embargo, who argued, presciently, that some future president might use it to manipulate prices for short-term political gain.
While the precise definition of “severe” in the EPCA is ambiguous, the context for the EPCA was the 1973 Arab oil embargo which was intended to dissuade the U.S. from supporting Israel during the Yom Kippur War.
The embargo didn’t change President Richard Nixon’s support of Israel, but the supply reduction had catastrophic short-term economic and social impacts.
Crude oil prices increased fourfold; job losses mushroomed as factories closed; gasoline was rationed; fights broke out in long gasoline lines; airlines curtailed flights; electricity generation from residual oil was reduced; and fuel allocations for the Defense Department were restricted.
These were the impacts Congress and President Ford created the reserve to prevent—not a simple doubling of gasoline prices over a period of several months, as happened this year.
While Mr. Biden’s drawdowns aren’t illegal, they are reckless. He might be gambling on the nation’s economic future in the face of many troubling international conflicts.
Depleting the reserve to its lowest level in 40 years could encourage a desperate Vladimir Putin to impose a major cut in Russian oil exports this winter to try to drive a wedge between the U.S. and its European allies to weaken the support of Ukraine as his military strategy falters.
The Russian president clearly has the capacity to dwarf the effects of the 1973 oil embargo.
The first task of next year’s Congress should be to ensure that the U.S. is prepared to mitigate the impact of oil shortages in the future by amending the EPCA to forbid explicitly the use of the reserve to manipulate prices in situations that have nothing to do with the nation’s security or economic well-being.
Read more at WSJ
