The Strategic Petroleum Reserve and Obama's anti energy policy

Daniel Horowitz:

President Obama has asserted ad nauseam that expanding oil drilling would not affect the price of oil and generate price relief at the gas pump. He has scoffed at the ‘drill, baby, drill’ plan, denouncing it as insufficient in dealing with our “long-term” energy needs. Now that his reelection prospects are beginning to wither, Obama is undergoing a foxhole conversion and easing his aversion to that “addictive” black substance. Or, so it seems.

Last Thursday, after several weeks of steady decline in the price of oil, and following secret meetings with the Saudis, Obama had an epiphany. Did he suddenly accede to calls for expediting drilling in the Gulf and in Alaska? Did he agree to lift the permitorium on drilling in 97% of the Outer Continental Shelf? Not a chance. Instead, his Energy Secretary announced the release of 30 million barrels of oil from our Strategic Petroleum Reserves (SPR), in conjunction with a 30-million-barrel release from other countries within the International Energy Agency (IEA). The total release will be 60 million barrels, proceeding at a rate of 2 million barrels per day (bpd) for a month.

The administration cited the loss of 1.5 million bpd from cessation of production in Libya as rationale for this unprecedented move. The problem is that the Libyan disruption occurred four months ago, inducing a sharp spike in the price of oil at the time. Obama categorically rejected the idea of tapping the SPR to mitigate the upward trajectory in oil prices, even as the price of gasoline soared over the dreaded $4 mark. Now that gas prices have declined over 40 cents and are trending down, due in part to the end of QE2, Obama decided that we are in an energy crisis to the degree that it warrants a release of the SPR!

While the steady drop in oil prices should clearly preclude any justification for the release, Obama felt that the precipitous drop in his approval ratings is tantamount to a national emergency. What he lacks in perspicacity of judgment regarding economics, he compensates with cognizance of polling reports.

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Aside for the fact that Obama is manipulating our emergency petroleum reserves for political gain, and exhibiting a lack of foresight in the timing of such a move, he is also revealing his energy policy duplicity for all to see. What happened to his disdain for short-term solutions in lieu of more prudent long-term solutions? What will happen to the price of oil when the 30-day release comes to an end? If anything, prices will climb to even higher levels than they were prior to the announcement, due to the increase in demand that will invariably follow during the next month.

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Since we will have to replace the reserved used, we will probably have to do so at a higher price raising the cost of this political maneuver even more.

Clearly what we should be doing is opening all areas to drilling which would create jobs, lower the price of energy and increase royalty revenues to the treasury to help lower the deficit. Those revenues are estimated at a trillion dollars. It makes much more sense than a tax increase on the business that would be producing the revenues for us.