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  • Releasing Oil from SPR Still Not a Good Idea

    Reuters reported that President Obama and Prime Minister David Cameron discussed jointly releasing oil from emergency reserves. Although the White House denied the report, releasing oil from our nation’s Strategic Petroleum Reserve is still not a good idea.

    The Strategic Petroleum Reserve (SPR), managed by the Department of Energy (DOE), exists for moments of national crisis when there is a dramatic disruption in oil supplies. The current high prices at the pump are a national concern, but playing politics with a national security asset is not the way to address the problem. The global oil market can adjust to supply disruptions. Releasing reserves now simply allows the Administration to avoid addressing the underlying problem with U.S. energy policy that exacerbates the market impact of global supply disruptions.

    There are more responsible actions that the U.S. could take to ensure that high oil prices do not curtail long-term economic growth. Foremost, increasing access to oil reserves in the U.S.—both onshore and offshore—would help offset rising demand, increase jobs, and stimulate the economy. The common complaint is that opening access to domestic resources takes too long (7–10) years. While this is true, we’re likely going to need that oil in the next decade, so why not open up those areas now? We’ll be the first in line to thank President Obama years from now when that oil is helping to offset higher prices.

    In the nearer term, there are still things the Administration can do besides releasing emergency reserves. As the Institute for Energy Research reports,

    Crude oil production on Federal and Indian lands decreased 13 percent from 739 million barrels in fiscal year 2010 to 646 million barrels in fiscal year 2011. Production of crude oil on Federal lands is dominated by offshore production, which fell by 17 percent in fiscal year 2011, mostly notably due to government actions taken following the oil spill in the Gulf of Mexico in 2010.

    Ramping up production on federal lands where we do have access will bring more supply to offset higher global demand.

    Releasing reserves from the SPR wasn’t a good idea last year, either, nor was it effective. Heritage’s David Kreutzer says, “If there is going to be a one-shot injection into the system, price will drop during the injection and bounce back after it stops. The speculators simply kept that price dip/jump from being bigger than it otherwise would have been by buying as the oil was released and reselling when the release stopped.” And, just to do “something” is no legitimate reason to tap the SPR. As James Jay Carafano and I outlined earlier, there are very limited circumstances under which the White House should release the oil, and none of the conditions for a “severe energy supply interruption” are reasonably met at this time.

    Whether or not there is any truth to the rumor of a joint U.S.–U.K. release of oil from the respective reserves, it doesn’t matter. The idea is nothing more than a temporary political fix—one that could make us worse off, should events deteriorate further in the Middle East.

    Posted in Featured [slideshow_deploy]

    9 Responses to Releasing Oil from SPR Still Not a Good Idea

    1. Red Hawk says:

      If the Obama Admin wanted to curb oil prices, then stop QE2 and stop deficit spending. This will keep the $ up & lower oil prices. Free mkt

    2. Pingback: How the Strategic Petroleum Reserve Affects Gas Prices

    3. Glenn Beaton says:

      BO says that increasing domestic production will not affect price, but seems to think that releasing oil from SPR will. Does the SPR oil have some magical quality that domestically produced oil does not (other than the "quality" that we sent our dollars overseas to get it)?

    4. Muchbemused says:

      There are more responsible actions, like increasing our energy efficiencies to world best practice. Or else libertarians will be bemoaning the fact that taxes will be rising to cover the cost of natural disasters from a warming world.

      And if conservatives are bemoaning illegal immigrants, wait till the flood of climate refugees starts.

      • Bobbie says:

        I think I agree with you? "our energy efficiencies to world best practice," is oil. But it probably stops there. There is already funds set aside for natural disasters so your distorting your claim. Why is it only conservatives bemoaning the illegalities toward the same country you live in if America is where you live? What are you doing to help immigrants learn to help themselves so their transition results independence without infringement to societies reflection of America's self reliant?

    5. HueyLives says:

      Every president since Reagan has done this in a presidential election year, to no ill effects (except to their political opposition).

      • YnotNOW says:

        Are you sure your name is not "HueyLies"?? Your comment is definitely NOT TRUE.

        And there are huge potential ill effects. Right now, part of the "risk premium" that is driving up the price of oil is turmoil with Iran and the threat to close the Strait of Hormuz. If Iran tried to follow through on their threat, we need the strategic petroleum reserve to mitigate markets during our response. If we draw down a percent now, we not only lose that capability, we signal the weakness to the Iranians who become incentivized to act on their threats.

        Still want to keep lying?

    6. Todd says:

      Good article. Releasing oil from the SPR is a very political, short-term measure that does absolutely nothing to solve any energy problem. And in the mid-term, will drive oil prices back up when the government has to re-place the released oil from the market. The country needs good long-term plans to get off of foreign oil and develop economical alternative energy sources. The Keystone Pipeline would have been a good step but this administration and the socialist Democratic party are playing politics over the good of the country. I just hope everyone remembers this at the voting booth this fall. Every Democrat needs to be thrown out of office (and many of the Republicans as well).

    7. Lloyd Scallan says:

      Obama hopes by releasing oil from SPR, the price at the pump will decrease just long enough for his job performance number to improve before November. It's pure political deception. At the same time Obama floats this "trial balloon", he is demanding Congress remove the tax insentatives from oil companies. That will result in not only a major price increase at the pump, but it will cost the industry to loose profit, which trickles down to the share holders who will have less retrun in their investment, which translates into less money pumped into the economy. This, of course, is exactly what is Obama final plan to collapse our economical system.

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