Tapping the oil reserve is bad policy
Mar 9, 2012 -
By. F. James Sensenbrenner
Congress created the Strategic Petroleum Reserve in 1975 to respond to “severe energy supply interruptions.” The president is authorized to tap into it if an emergency of significant scope and duration threatens to cause a price increase that is likely to have a major adverse impact on the national economy.
In the early 1970s, the Arab states in the Organization of Petroleum Exporting Countries embargoed U.S. exports because of Washington’s support for Israel. The economic effects were devastating — gas prices skyrocketed, lines at gas pumps snaked longer and longer and the government struggled to develop effective fuel-rationing methods.
Congress created the SPR to mitigate future crises. As gas prices now climb higher, Democrats are increasingly calling for President Barack Obama to release oil from the SPR.
I have always favored policies to lower fuel prices but draining the SPR is the wrong approach. We need long-term policies to reduce prices by increasing supply and decreasing demand. It is the height of hypocrisy for the president to drain the SPR to counteract price increases when his own energy policies are the single greatest supply interruption.
The SPR exists to provide Americans security in case of a crisis. The potential for such an interruption has rarely been so prominent. As Washington tightens economic sanctions on Iran to deter its nuclear program, Tehran has threatened to blockade the Strait of Hormuz, disrupting up to 20 percent of the world’s oil supply. The economic effects could be devastating — driving gas prices higher, bringing the fledgling recovery to a standstill and halting Americans’ ability to get to work or school.
The SPR was formed with the explicit purpose of mitigating these threats. Iran views oil as a weapon. The SPR is a shield that can blunt the magnitude of the market’s reaction to a legitimate crisis.
It had been tapped only twice before this administration — once during the first Gulf War and once in response to Hurricane Katrina. If the president releases oil this spring, it will be the second time he has done so in less than a year.
As House Speaker John Boehner (R-Ohio) said last year, “by tapping the Strategic Petroleum Reserve, the president is using a national security instrument to address his domestic political problems. The SPR was created to mitigate sudden supply disruptions. This action threatens our ability to respond to a genuine national security crisis and means we must ultimately find the resources to replenish the reserve — at significant cost to taxpayers.”
The president is again attempting to use a short-term tool in place of a long-term energy strategy.
Instead of tapping the SPR, he should increase drilling on public land, lift the de facto moratorium on offshore drilling, approve the Keystone pipeline, open new offshore areas to drilling and begin to review and roll back policies that cause regulatory delays without corresponding public benefits. These policies would increase our oil supply over the long-term — reducing prices and our dependence on foreign oil.
Smarter long-term policies could also have an immediate effect on gas prices. Advocates of draining the SPR understand it does not have enough oil to affect the fundamentals of supply and demand. They argue that tapping the reserve may provide short-term relief from rising prices by dampening financial speculation.
Announcing smarter energy policies will have the same immediate effect without risking our ability to respond to a crisis. Policies leading to an increased oil supply will deter long-term bets on higher oil prices. In contrast, tapping the SPR will boost our immediate domestic supply of oil but does nothing to increase our future supplies.
Any price depression from opening the SPR will simply create a new buying opportunity for speculators because the long-term realities will be the same. The president has never understood this fundamental problem with government interference in a free market.
Democratic proposals to drain the SPR are a political stunt, meant to counteract Obama’s failed energy policy. Far from harmless political theater, releasing oil from the SPR will very likely mask and exacerbate the problems driving energy prices higher. It also weakens an important pillar of the infrastructure designed to protect our national security.
Rep. Jim Sensenbrenner (R-Wis.) is chairman of the Judiciary Committee’s Crime, Terrorism, and Homeland Security Subcommittee and vice chairman of the Committee on Science, Space, and Technology.