Obama Withdraws 30 Million Barrels

Cash for Pumpers

By Jeffrey Folks

On Thursday the President announced that he would release 30 million barrels of oil from the nation's Strategic Petroleum Reserve. The immediate effect on world markets was to knock the oil price down by over $4 a barrel. But many experts question the wisdom -- and the timing -- of the move.

Clearly, the timing of the withdrawal was politically motivated. Any reduction in the price of gas at the pump is going to be popular, especially with Obama's political base and with independents who are key to his reelection. The problem is that, like every other form of stimulus attempted by this administration, the SPR drawdown will have only temporary results. And in the long term, it will almost certainly drive prices up.

Global demand for oil is now 89.3 million barrels per day and rising nearly 2% annually, according to the IEA. Obama's withdrawal of 30 million barrels over the next month, adding about 1% to current supply, will have little effect on global market prices over time. What it will do is to inject further uncertainty in the oil market, causing producers to think twice before committing new investment to new drilling.  Oil companies are already facing opposition by the EPA, the Interior Department, the State Department, and other federal agencies. Under Obama, political barriers to new exploration are at an all-time high. Now these companies, which are eager to expand production, are faced with more interference by the Obama administration.

Before committing another $20 billion to energy exploration and development, America's oil companies are going to want to know whether they can expect a decent return on theirinvestment.  What the President has done is signal his willingness to undercut their plans if it is politically expedient to do so.

Of course, that's one side of Obama that we have seen before.  He was willing to throw the Rev. Jeremiah Wright, his closest mentor and godfather, under the bus when it was necessary to do so.  He was willing to sack his dear friend Van Jones at the point when Jones's public comments became too outrageous even for this administration.  He sent Larry Summers packing when it became apparent that the economy was not turning around as hoped. Obama's own half-brother has been huddling in an African hut for years while the President, apparently for political reasons, pretends that he does not exist. (Could it be that the American people might feel some qualms about polygamy within the Obama household, if such were brought to their attention?) There seems to be no one, friend or family, that the President is unwilling to abandon for the sake of political gain. 

Worse yet, there is not action affecting the country that the President is unwilling to undertake if he thinks it will aid him politically. The nation's security, the economy, the solvency of Social Security and Medicare -- all are expendable if necessary to Obama's reelection.

The Strategic Petroleum Reserve, which is meant to be tapped only in the case of emergencies, is a case in point.  The reserve plays a crucial role in America's national security.  It is meant to be tapped only in the event of war or some other true emergency.  Clearly, the fact that Obama's polling numbers are in the dumps does not constitute a national emergency.  But the fact thatObama is willing to tap the SPR at this time reveals something fundamentally wrong about his thinking.  In Obama's mind, bad polling numbers apparently do constitute an emergency -- an emergency far more serious, or so he believes, than a war or economic crisis in which the well-being of the American people is at risk.

If it were the well-being of the people that mattered most, Obama would have opened up drilling in the Gulf of Mexico a year ago, and not just with a token number of permit approvals.  If he were interested in the long-term energy security of the American people, Obama would be promoting exploration in the arctic and offshore Alaska and offshore the continental U.S.  But by releasing 30 million barrels of oil from the SPR, he is merely injecting uncertainty into the markets and causing companies to reconsider plans for new investment.

Clearly, the President's directive is pure politics, intended to placate a restive electorate by temporally driving down the price of oil.  And just as cash for clunkers did nothing to increaseautomobile sales -- it merely drew sales forward by a few months, increasing sales in the summer while reducing them in the fall -- cash for pumpers will do nothing to lower the long-term cost of energy.

Removing over 4% of oil from the SPR, however, is serious business.  If Obama finds it politically expedient to continue drawing down our reserves, as he threatens to do, the country could be in desperate straits in the event of a true emergency.  It is not difficult to imagine a war in the Middle East closing down the Strait of Hormuz, and such a war could break out at any time.  The SPR is designed to provide a buffer of oil supplies in the event of such an emergency.  Empting the petroleum reserve for political purposes is a dreadfully irresponsible act on the part of this or any president.

Once again, Obama has put political expediency above national security. He is gambling that a true emergency will not present itself right away, but emergencies do not announce themselves in advance, and presidents should not gamble with the nation's security.  Reducing the nation's reserves of petroleum places the country in a vulnerable position relative to those who wish us ill, and especially in relation to major oil-producers such as Iran and Venezuela.  Do not think for a minute that Obama's politically expedient move was not noted in Teheran or Caracas.  Without a fully stocked Strategic Petroleum Reserve, America is at risk of political blackmail, or worse.