Close window  |  View original article

Better to Have and Not Need...

Filling the Strategic Petroleum Reserve is a good idea.

By Petrarch  |  May 15, 2008

As gas prices break records daily and American drivers scream in pain at the pump, Congress is putting on its customary act of appearing to Do Something.  This week's Something also provides the benefit of letting the Democratic Congress try to put a finger in the eye of their favorite bogeyman, President George W. Bush.  Accordingly, they have passed a law telling Bush to stop buying oil for the Strategic Petroleum Reserve, ignoring his protests.

For once, congressional action makes a certain economic sense.  The bureaucrats who buy oil for the SPR buy on the open market, just like any other oil buyer.  If the government stops buying, obviously that's one less customer and consumption will go down; the famous laws of supply and demand therefore dictate that the price will go down too.

This is not to say that it's going to make much difference, as the article points out:

The action was expected to have a modest effect on pump prices, saving motorists an estimated 2 to 5 cents a gallon, backers said.

Well, every little bit helps, one might suppose.  The reason the savings are so small is because, as petroleum-buyers go, the SPR is a tiddler: Bush has been buying 70,000 barrels every day, just one-tenth of one percent of global demand.  Putting a stop to these purchases is a symbolic measure at best; even if the promised maximum price reduction of a nickel does appear, will anyone even notice?

What would get noticed is the price we may wind up paying for this politically expedient but irresponsibly shortsighted action.  The Strategic Petroleum Reserve, as its name implies, is supposed to be our national emergency reserve supply in case something goes seriously wrong.  At the moment, it contains enough to run our entire country for two months - which sounds like an awful lot of oil, but not at all like a very long time.

There is ample reason to fear a supply disruption.  We are on rather bad terms with several major oil-producing nations, notably Hugo Chavez's Venezuela and Ahmadinejad's Iran.  Since oil is a global commodity, it doesn't so much matter whether we buy the oil from these nogoodniks as long as somebody does; but in the event of a military conflict with Iran, odds are they would be in no position to continue shipping oil to anyone.  What's more, even countries we aren't likely to bomb are not averse to throwing their weight around in the energy market by strategically suspending shipments, as Russia has done in Europe.

Then, there's the ever-present possibility of terrorism.  Oil pipelines are notoriously fragile and vulnerable to attack, and they are damaged routinely in Nigeria and other African countries.  The Saudis have foiled numerous bombings at the world's biggest oil facility, Abqaiq.  Most Saudi oil is exported from this one facility; and Saudi Arabia produces one sixth of the world's petroleum.

It's utterly irresponsible for our leaders to blithely assume that the Saudi security forces are omnicompetent and that al Qaeda will ever remain buffoons; sooner or later one attacker is going to slip through.  What would happen if - well, when really - one sixth of the world's oil production goes offline for emergency repairs?

That is the purpose of the Strategic Petroleum Reserve.  An impact of that magnitude would send global oil prices off into the realm of fantasy.  Can we even imagine what would happen to our economy if fuel-pump prices were, not $5 a gallon, but $20?

With two months' supply on hand in the SPR, at least America would have the option of slapping an immediate embargo on oil exports and releasing the contents of the Reserve onto the domestic market just to keep the lights on.  This sort of emergency relief is the kind of strategic tool that a wise country keeps on hand.

Any financial adviser will tell you to keep two months' salary in the bank in case of an unforeseen disaster.  Oil is the lifeblood of our whole country's economy; should we do any less?

But the Democratic Congress has chosen to make a symbolic political gesture that will have an infinitesimal effect on gas prices and which carries a potentially astronomical cost to our society.  How utterly typical.  Being a liberal means never saying you're sorry - and shame on the Republicans who are going along with this.