September 03, 2015
the nation’s oil-export ban is a no-brainer. But while we’re at it, let’s
ditch the Strategic Petroleum Reserve (SPR), too.
containing a bit under 700 million barrels, the reserve, “the largest
stockpile of government-owned emergency crude oil in the world” was born during
the crescendo of resource-depletion silliness.
Limits to Growth
set the apocalyptic tone. Once the nonsense nozzle was opened, no
spine-chilling forecast was rejected by the purveyors (and acceptors) of conventional
wisdom. MIT predicted that the “supply of oil will fail to meet increasing
demand before the year 2000, most probably between 1985 and 1995.” Exxon warned
that “oil production growth [could] taper off and possibly reach a plateau
before the end of the century.” In 1979, NEWSWEEK
claimed that at “present rates of consumption, America’s oil and gas will be
gone within a decade.” As late as 1982, the Organization for Economic
Co-operation and Development
worried that “from the late 1980s onward, oil supplies will not be able to keep
up with the demand for oil.”
science with kooky economics, and throw in two Persian Gulf-based “oil shocks.”
It made for widespread support of the SPR, viewed as a tool to deal with future
oil “cutoffs.” Enabling legislation was signed by Gerald Ford, the
reserve got underway during Jimmy Carter’s administration, and Ronald Reagan
boasted that he was filling the SPR more quickly than his predecessor.
oil is stored in salt caverns at sites along the coastline of the Gulf of
Mexico. Impervious to oil, at the bottom of the caverns, “salt has a strength
comparable to concrete.” The typical SPR repository is as deep as One World Trade Center is high.
sheet issued by the U.S. Department of Energy (DOE) called the SPR “the
nation’s ‘energy insurance policy.’” If that’s what it is, taxpayers have been
ripped off. In 1991, with Saddam Hussein in control of Kuwait’s oilfields and
war looming, George H.W. Bush chose to drain some of the SPR. But when the
“mother of all battles” turned out to be a
pathetic rout, Poppy’s
injection of petroleum became irrelevant. As the DOE documented: “The United
States sold 17.3 million of the 33.8 million barrels originally offered.”
a few months before the presidential election, Bill Clinton justified his
decision to access the SPR by citing a possible shortage in heating oil. (Bill
Richardson, then the Secretary of Energy, insisted that the move was “not
political.”) A decade later, the Obama administration released another 30 million
barrels, “in response to the ongoing loss of crude oil due to supply
disruptions in Libya and other countries.” Even The Economist dinged Obama for wanting “to look like he’s doing
time, and technology have rendered the SPR a superfluous “asset.” Since the
1970s, conservation, efficiency, and alternatives have made oil far less
central to the U.S. economy. Suppliers -- former Soviet republics, nations along
the Gulf of Guinea
-- proliferated, and OPEC’s power dwindled. Finally, fracking has put what
should be the last nail in the SPR’s coffin.
In May, production of crude in the United
States was 9.5
million barrels per day -- 74 percent higher than it was five years earlier.
Even the cratering of the global petroleum price hasn’t led to a sharp dive in domestic
production. Drillers are constantly finding
new and cheaper ways to tap black gold. Soon, America will get all the oil
it needs from homegrown sources, Canada, and Mexico.
the SPR’s oil won’t get Washington out of the red. Assuming $40 per barrel, the
reserve is worth about $28 billion. (Some perspective: June’s federal budget
deficit was $52 billion.) The most compelling reason to scrap
the SPR is to acknowledge the truth, once and for all, of what really happened
with oil during the Me
Institute for Energy Research’s Robert Bradley Jr. explained in a
recent blog post, “The 1970s energy crisis cannot be properly interpreted
without understanding the role of government intervention in precipitating and
exacerbating the crisis.” Meddling in the Middle East snakepit, imposing price
controls, establishing a petroleum-products allocation system, adopting a tax
on “windfall” profits -- all worked to generate high prices and lengthy waits
at gas stations. The SPR was a dubious “solution” to a problem Washington
energy policy is rarely burdened with coherence. But the existence of SPR takes
Washington’s ignorance of petroleum economics to befuddling level. It’s long
past time for the reserve to be eliminated.
D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.
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