Tapping the Strategic Petroleum Reserve won’t help lower gas prices to $2.50, and it won’t help the President win voters who are afraid his energy policies are bringing the country back to the ‘70s era of long gas lines, bell bottoms, leisure suits, “Gee Your Hair Smells Terrific,” and “Please Don’t Squeeze the Charmin.”
So, please don’t squeeze the SPR, which is already low. Because "Draw, Baby, Draw" is not an energy policy. And it won’t move the needle on gas prices, and even if it does, that blip will be only temporary.
President Barack Obama is now mulling tapping the SPR, as he now says on the campaign stump that we can’t drill our way out of the high-gas problem, because that won’t move the needle.
So then why tap the SPR?
It only moved the needle temporarily last time it was tapped, when Libya was red hot. It only moved the needle slightly when President George W. Bush tapped it after Katrina in the fall of 2005. Gas still went to $2.98 by July 2006 from a $2.93 national average in September 2005, due to lost supplies from Venezuela and Iraq.
Turning on the SPR spigots didn’t stop gas rising when President Clinton or President George H.W. Bush tapped it, either.
The SPR’s inventory is now at 695.95 million barrels, though it has a maximum capacity of 727 million barrels. It is supposed to be used in emergencies like Iran shutting the Strait of Hormuz, not political panics over losing re-elections. According to the DOE the SPR last reached its all-time high level of 726.6 million barrels in December 2009.
Even Wall Street analysts urge the US to keep the powder dry, as analysts at places like Merrill Lynch warn oil could rise to $200 — especially if Iran really shuts down the Strait of Hormuz.
But three top Democrats now urge the White House to unleash the SPR; Reps. Ed Markey, Peter Welch and Rosa DeLauro are urging President Obama to open up the spigots.
Even though in their letter they admit supply is not an issue. And even though U.S. liquid energy demand is at a 15-year low.
“This most recent run-up in prices is primarily the result of fear driving oil markets, not an actual loss of supply,” the three wrote in a letter to President Obama, adding that it would "send a message to Iran that we are ready, willing and able to deploy our oil reserves.”
Analysts are right -- this is the wrong response to the wrong problem at the wrong time.
Yes, the Saudis are pumping at 30-year highs. Yes the Saudis are the world’s oil cushion, not the SPR.
But still the Saudis say they could ramp up if needed, as oil producers know full well the daily cushion is anywhere between 1.7 million spare barrels a day (says Barclays Capital) to 2.25 million. Yes, that’s wafer thin, and yes, oil producers rig quotas to keep prices at levels they want.
Even Maria van der Hoeven, head of the International Energy Agency, said recently there is no “major supply disruption,” that “such a disruption has not yet occurred, so no specific response plan is currently in place.”
Also, we get zero oil from Iran. Europe gets something like 0.6% of its daily oil from Iran. Russia, countries in Asia, all should fear Iran.
The Strait of Hormuz threats are huge. But the United Arab Emirates are fast at work building their own oil pipeline to circumvent the strait. And besides, do you think the other oil producing nations who use the strait are going to sit back and let Iran plug it?
Isn’t it true that our dependency on foreign oil actually rose from roughly 37% to 41% under this administration?
Could we lower gas prices more quickly by sending a “Drill, Baby, Drill” message to the Mideast and speculators that we intend to ramp up production? Is that a better energy policy than political one-offs from the SPR?
Elizabeth MacDonald joined FOX Business Network (FBN) as stocks editor in September 2007.
Follow Elizabeth MacDonald on Twitter @LizMacDonaldFOX.