On Thursday, the White House and International Energy Agency (IEA) announced that a joint effort is currently underway to release 60 million barrels of oil into the global market to offset rising energy costs. Over the next 30 days, the U.S. and other partners within IEA will release these reserves to offset disruptions in global oil supply caused by the recent social and economic turmoil occurring throughout the Middle East.
In support of this effort, the Obama Administration plans to contribute 30 million barrels of oil to be withdrawn from the U.S.
Strategic Petroleum Reserve. Energy Secretary Steven Chu said in a statement, “We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery.”
The release of these vital reserves comes at an interesting time as oil prices have begun to wane as a result of recent gains in the U.S. dollar and declining projections of global economic growth.
The Strategic Petroleum Reserve was established to provide relief in case of any temporary disruption in oil supply, like natural
disasters, hurricanes, or a blockade of oil imports from other nations. Essentially, our strategic stockpile serves as a safety net for our nation in times of emergency. It is important to be responsible and particular about any decision to utilize these reserves. Maybe our nation will face a significant war or experience another hurricane Katrina in the near or distant future. Having access to vital fuel in those certain emergency situations is extremely important to the safety and security of our country.
The Administration’s decision to release a portion of our oil reserves is purely political in nature. The decision to tap our strategic stockpile will only serve as a short-term response and simply ignores the implications of our country’s failed energy policies.
To put it into perspective, the 30 million barrels of oil that the US plans to contribute is the equivalent of seven and one-half days of oil production that we are projected to lose in the Gulf of Mexico as a result of the federal drilling moratorium and the government’s inability to permit ongoing and future projects in the Gulf region.
So, why release our oil now? It’s fairly simple. It’s campaign season.
The underlying fact is that the U.S. economy is recovering at a slower pace than expected, and the Obama Administration and Feds are running out of solutions to fix the dwindling economic situation. With the 2012 Presidential election already underway, the hottest issue for candidates will be the economy and efforts to alleviate pain at the gas pumps. Dumping a significant amount of oil into the open market will give short term relief on projected oil prices and might just buy some time leading up to the November election.
Unfortunately, a policy decision of this nature will not fix the economy nor will it have an impact on the future global energy crisis we face. The reality is that the global oil markets are driven simply by supply and demand. The only way we can climb out of the economic issues we face and drive energy prices down long-term is to incentivize American companies to explore and produce our own natural resources here at home.