It’s 2067, and you’re still wearing a face diaper.
Still slathering yourself in sanitizer.
And next week you’re scheduled for Rona booster shot #78.
Sounds crazy, but it’s a decent metaphor for the Strategic Petroleum Reserve (SPR). As Republicans and Democrats bicker over the “world’s largest supply of emergency crude oil,” it’s an opportune time to explore what happens when fatuous resource economics mixes with the tyranny of inertia.
While Gerald Ford signed the SPR’s enabling legislation in 1975, the “thinking” behind the reserve went back decades. A U.S. Department of Energy (DOE) handout from 1991 recounted the history:
Secretary of the Interior Harold Ickes advocated the stockpiling of emergency crude oil in 1944. President Truman’s Minerals Policy Commission proposed a strategic oil supply in 1952. President Eisenhower suggested an oil reserve after the 1956 Suez Crisis. The Cabinet Task Force on Oil Import Control recommended a similar reserve in 1970.
It wasn’t until 1973, when some members of OPEC briefly placed an embargo on their exports to the U.S., that the concept got enough political juice for congressional action. Fedpols decided that “the storage of substantial quantities of petroleum products will diminish the vulnerability of the United States to the effects of a severe energy supply interruption, and provide limited protection from the short-term consequences of interruptions in supplies of petroleum products.” And several years later, the SPR — “huge underground salt caverns at four sites along the coastline of the Gulf of Mexico” — began to be filled.
But “do something” legislation invariably crafts “solutions” to largely nonexistent problems. As Cato Institute scholars noted, once crude is delivered to “a tanker or refinery, there is no controlling its destination,” and during the embargo, “oil that was exported to Europe was simply resold to the United States or ended up displacing non-OPEC oil that was diverted to the U.S. market.” In 1973, and again in 1979, drivers faced gasoline lines because of domestic red tape, not foreign dastardliness.
Energy economist Benjamin Zycher called it a “price and allocation regulatory apparatus,” and under the command of the Nixon, Ford, and Carter administrations, the system grew “increasingly complex, ad hoc, and receptive to goals and pressures having little to do with pricing and allocation of fuel.” Once D.C.’s micromanagement of the market went away, so did gasoline lines.
Yet the SPR, a prime target for the Reagan/Bush era’s deregulators, remained. In 1991, with Saddam Hussein in possession of Kuwait’s oilfields and war looming, George H. W. Bush chose to drain some of the reserve. But when the “mother of all battles” turned out to be a pathetic rout, Poppy’s decision became irrelevant. The DOE admitted that the “United States sold 17.3 million of the 33.8 million barrels originally offered.”
In 2000, a few months before the presidential election, Bill Clinton justified his decision to access the SPR by citing a potential shortage in heating oil. (Bill Richardson, then the Secretary of Energy, insisted that the move was “not political.”) George W. Bush tapped a slim share after Hurricane Katrina. Six years 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 something.”
And now, Joe Biden’s in charge of the SPR. He released some relatively small amounts in late 2021 and early 2022, and in March, announced a plan for a whopping, 180-million-barrel drawdown. It’s an unprecedented, transparent act of election-focused desperation, but in a cavernous manifestation of missing the point, the GOP has made an embarrassing spectacle worse.
The right’s China paranoiacs erupted over the sliver of SPR bought by a U.S. subsidiary of Sinopec. Liberal fact-checkers — sometimes, they can be trusted — have thoroughly demolished the “scandal.” Petroleum is a commodity bought and sold on a planetary market. As the Baker Institute for Public Policy’s Mark Finley explained, whether the SPR’s black gold “stays in the United States or goes somewhere else is less important than does it succeed in changing the global balance of supply and demand, because that’s what drives the price.”
Instead of assaulting Biden for aiding “our enemies,” Republicans should strike at the root. The SPR “never found its purpose,” in the assessment of the Institute for Energy Research’s Robert Bradley, Jr., and the reserve “stands today as a … monument to government overreaction to an energy crisis that was not caused by the free market.”
The SPR needs a mercy killing.
Excellent and timely article.