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.