President Barack Obama’s release of oil from the Strategic Petroleum Reserve has political and economic benefits, but both are likely to be transitory.
The timing is somewhat puzzling because the price of gasoline and crude oil has been falling the past month and we don’t seem to be in the kind of emergency the reserve was designed for during the days of the Arab price shocks back in 1975.
The reserve has been breached only twice, and then briefly, in 2005, when Hurricane Katrina disrupted the Gulf oil industry and in 1991, when the Gulf War rattled world oil markets.
The White House insisted it was acting to head off a possible disruption at a time of peak summer demand.
Republicans denounced it as a political gimmick.
The United States acted in concert as part of the 28-nation International Energy Agency, formed in 1974 as a counterweight to the Organization of Petroleum Exporting Countries. The U.S. will draw down 30 million barrels from its stocks and Europe, Japan and South Korea 30 million barrels from theirs.
IEA acted in response to the loss of 1.5 million barrels a day from Libya and OPEC’s refusal earlier this month, despite the best efforts of Saudi Arabia, to raise production quotas.
Europe suffers most from the loss of Libyan oil, so perhaps maintaining international economic harmony was reason enough for Obama to order the release. At 30 million barrels, it’s hardly a major dent in the 727-million barrel reserve.
But there are clear benefits to the Obama administration. The prospect of that oil reaching refiners has caused analysts to forecast gas prices will fall from the current $3.61 a gallon to $3.40 or lower by the July Fourth weekend. That should keep consumers on the road during the summer driving season. And cheaper energy prices should give a boost to the flaccid economy.
The impact of the release may not last much past Labor Day. However, if the release succeeds in re-firing the economy, Obama will get a pass, just this once, from the proposition that the reserve should be tapped only in a genuine emergency.
The administration should also address the supply side by approving expanded drilling and exploration off America’s coasts. Alternative energy only nibbles at the margin of the problem. We need oil.
Dale McFeatters is an editorial writer and columnist for the Scripps Howard News Service.