This morning, after word hit that the Obama administration was dumping 30 million barrels of oil from the Strategic Petroleum Reserve onto the market in an effort to drive oil prices down, Rep. Steve Scalise (R-Metairie) expressed in technicolor the sentiment of folks who actually understand economics.
“The Obama Administration’s reckless decision to raid the Strategic Petroleum Reserve is yet another example of the President’s failed energy policy that has resulted in thousands of lost jobs and skyrocketing gas prices,” Scalise said. “Rather than creating jobs by exploring for known reserves of American energy, the Obama Administration is raiding our “rainy day” supply of oil that should instead be reserved for national emergencies.”
There is absolutely zero reason – other than politics – for Obama to dump oil from the SPR at this point.
If he was serious about doing something on oil prices, the President would get the EPA out of West Texas, where they’re attempting to stop oil production in the Permian Basin due to a three-inch lizard nobody gives a damn about that isn’t even hurt by oil drilling.
Or he’d do something about the ridiculous uncertainty his Department of Interior has imposed on drilling in the Gulf.
Or he’d announce his support for the bill House Republicans just rammed through expediting Clean Air Act permits for oil drilling, in Alaska and elsewhere.
Or he’d stop the EPA from trying to destroy hydraulic fracturing and the natural gas revolution it’s creating across the country.
Or he’d hold a lease sale for drilling rights on federal lands.
If Obama did some of these things in concert with dumping oil from the SPR, it would be a legitimate market signal that oil prices will come down due to an increase in American supply.
Rep. Jeff Landry had this right…
“The President continues to be a day late and a dollar short. Since House Republicans have aggressively fought back against rising gas prices by passing multiple energy bills in May, oil prices have fallen to under $100 per barrel and the average gas prices have dropped 30 cents. Once again, the President is leading from behind. Unfortunately, the American taxpayers will be forced to pay the price.
“Instead of spending millions of dollars to release and replace the reserves from the SPR, the Administration should be issuing permits in Alaska and the Gulf of Mexico, our real strategic reserve. Americans are tired of irresponsible, political stunts by the President like today’s announcement; we want continued lower energy prices and we want jobs.”
Landry noted that releasing oil out of the SPR carries some not-insignificant transaction costs…
SPR site drawdown release costs for power, oil sampling and testing, delivery inspections, etc. are roughly $0.10 per barrel. SPR site drawdown receipt costs for power, brine disposal, receipt inspections, oil sampling and testing, etc. are roughly $0.18 per barrel. Additionally, there can be terminal charges associated with a drawdown at the SPR. For marine deliveries, the SPR must pay marine vessel loading costs, which are between $0.25 and $0.30 per barrel.
But Scalise and Landry recognize what the markets recognize – Obama doesn’t know or doesn’t care about resolving the price of oil at a level that won’t harm the economy. All Obama cares about is that he’s getting blame for a crappy economy, and the reason people say the economy stinks is that oil prices are too high. And he can dump oil from the SPR without offending his masters at the Sierra Club and Natural Resources Defense Council.
Oil prices will drop this week. In two weeks they’ll be right back to where they were before.
This is another example of an administration that doesn’t have the first clue what they’re doing. And there is zero chance of an economic recovery until it’s out of office. That’s patently obvious at this point.
UPDATE: Sen. David Vitter weighs in:
U.S. Sen. David Vitter today made the following comments on the Obama administration’s decision to release 30 million barrels of oil from the Strategic Petroleum Reserve (SPR):
“This is now the second time that the Obama administration has admitted that supply is the main problem behind our rising gas prices; first came their encouragement of other countries like Brazil to step up their production and now comes this move to open our own Strategic Petroleum Reserve. As long as they continue to virtually shut down energy exploration here at home, this opening of the reserve will do absolutely nothing to help our long-term supply problem, and it certainly won’t put the Gulf energy industry back to work,” said Vitter. “We need long-term, expansive domestic energy measures like my 3-D legislation.”
The Energy Information Administration recently estimated that domestic offshore oil production would decline by 220,000 barrels per day this year due to the effects of the Obama administration’s virtual shutdown of drilling in the Gulf of Mexico. That is equivalent to more than 80 million barrels less oil per year – or 50 million barrels more than what the Obama administration has decided to release from the SPR.
Earlier this year, Vitter introduced 3-D: The Domestic Jobs, Domestic Energy, and Deficit Reduction Act of 2011, which would create more than 2 million jobs, $10 trillion in economic activity and $2 trillion in federal tax receipts (conservative 30-year estimates) by unleashing America’s vast domestic energy potential.
UPDATE #2: Fox News’ Eric Bolling has this right…
The release of 30 million barrels of our Strategic Petroleum Reserve is short-sighted and misguided at best and downright political theater at worst. But what else would you expect from the Obama Energy agenda? The SPR was intended to be used in the event of a major disruption to OUR oil supply. There is no such disruption. Prices have been falling and we should stop interfering with the free market. Besides, any drop in oil prices will be temporary. We haven’t increased our domestic production of oil, in fact, U.S. domestic oil production (5.6 million barrels per day) is 40% lower than it was in 1970 (9.6 million barrels per day). So, as soon as this “high” wears off, we will be left with that same old addiction to FOREIGN oil … and nothing the Department Of Energy did today will fix that.
UPDATE #3: Rep. Charles Boustany…
“It is absolutely wrong to use oil from the SPR when American energy production is down by a quarter of a million barrels a day in the Gulf of Mexico,” Boustany said. “This is an ill-advised, desperate political move by this Administration which will have no lasting effects on the economy. Releasing 30 million barrels of oil from our strategic reserves will do nothing to spur long-term economic growth. With their actions, the Administration proves yet again it has no meaningful energy policy for this country and has no serious plan to fix our economy.
“We should promote American energy production, especially in Louisiana and along the Gulf Coast, rather than rely on these ill-advised strategies. The SPR should be used only for crises, not for market manipulation. As we find more untapped energy sources around the country, this Administration continues to put up barriers to avoid using them. These actions by the Administration are completely unacceptable.”
UPDATE #4: Offshore Marine Services Association President Jim Adams…
After weeks of “secret meetings,” the President infused international markets with 30 million barrels of oil from our U.S. Strategic Petroleum Reserve. Was it to replace the half of 62+ million barrels of lost oil production in the Gulf of Mexico since he imposed a moratorium on domestic drilling 388 days ago? Not quite.
According to today’s press, the President is compensating for lost production resulting from the conflict in Libya. How dependent is the U.S. on oil imports from Libya? Of the 88 million barrels of oil we consume in one day, Libya provides us with a paltry 44,000 (0.05 percent).
What’s the real reason? The economy is tanking and American’s won’t let the President forget that they’re paying nearly $4 per gallon for gasoline.
Prior to the President’s drilling moratorium in the Gulf of Mexico over a year ago, the Gulf produced 1.7 million barrels of oil a day. Today, as a result of his policy directive, production will continue to drop precipitously — by 330,000 barrels a day in 2012, according to the Department of Energy.
Brazil? Libya? When will President Obama put Americans back to work drilling for American oil?