A trial balloon that failed to rise above the president’s rhetorical gutter.
On Thursday, Reuters reported that Britain and the U.S. have reached an agreement to release oil from the nations’ oil reserves. The report states that the idea originated with the Obama administration and that “Britain would respond positively” to a formal request.
Such a move would be a reprise of a similar failed effort less than a year ago. However, given pressure from Democrats and bad polling for President Obama on fuel prices, the initial report is easier to believe than the White House’s denial. Indeed, the denial did not say that this was not a topic for discussion between Barack Obama and British Prime Minister David Cameron, but simply that there was no actual agreement.
The burst of activity, including how quickly the administration had a response ready, had the distinct air of a “trial balloon,” something that panicky administrations resort to when out of ideas.
In June 2011, President Obama, desperate to avoid the political ramifications of high oil and gasoline prices, announced a release of oil from America’s Strategic Petroleum Reserve. The release, justified on the basis of the temporary interruption of Libya’s oil exports, was coordinated with two dozen other nations. The U.S. released 30 million barrels of oil from its stockpiles, with other nations matching that amount in the aggregate, for a total of 60 million barrels of oil put on to the world market.
For perspective, the world uses about 89 million barrels of oil per day. Of that amount, nearly 20 million barrels is used by the U.S., about 14 million by Europe, and about 10 million by China. So last year’s release sated U.S. demand for 36 hours and world demand for half that time.
It was only the third time that the SPR had been tapped, with the first two being in 1991 during the Iraqi invasion of Kuwait and in 2005 just following Hurricane Katrina’s damage to the Gulf’s oil production and refining facilities. Obama now proposes the fourth, with no supply interruptions — other than those his administration is causing by blocking pipelines and drilling — to justify the request.
Following news of the June 2011 release, oil briefly fell about $3 per barrel to $91 in trading on the NYMEX. In ensuing days, oil prices recovered as the market realized that the SPR release was a drop in an oily ocean.
Prior to the Reuters report on Thursday, crude oil had been trading just below $106 per barrel. The news knocked it down almost $2 in 5 minutes before recovering two thirds of that drop, trading back above $105 within 40 minutes of the initial news and the subsequent White House denial and ending the day down only a few cents from Wednesday’s closing price.
During an oil price decline during the late summer of 2011 which accompanied a stock-market sell-off amid fears of slower global economic growth, the SPR did not replace the oil released in June. Thus, the government sold 30 million barrels of oil in the low $90s, which is now at least $12 higher, costing taxpayers over $350 million so far. At least it was a smaller loss than Solyndra.
If only President Obama were as good a commodity trader as Hillary Clinton.
SPEAKING OF SPECULATORS, Democrats often blame them for higher oil prices. To be sure, there is substantial speculator participation in oil markets. However, as usual for the political party that believes that people do not react to economic incentives, Democrats misunderstand capital markets. Speculators will not be deterred by any short-term policy, such as tapping the SPR, that does not change the fundamental long-term supply and demand calculus.
On Wednesday, the head of the International Energy Agency, Maria van der Hoeven, noted that the supply-demand balance currently favors higher prices — thus minimizing any suggestion that speculators are the primary force in current prices — but that the situation it is not dramatic enough to justify the move a desperate Obama administration may be calling for: “There is a tightening market, there is no doubt about that. At this moment there is no need to use [strategic oil reserves].”
President Obama’s energy policy is schizophrenic at best. Obama himself, as well as Energy Secretary Steven “I don’t own a car” Chu, are on record supporting high energy prices as part of their cultish devotion to “renewable,” which is to say inefficient, energy sources. Chu offered a refreshing bit of truth when speaking before a congressional committee on February 28, saying that lowering fuel costs was not the Energy Department’s goal. And Obama famously said that his cap-and-trade policy would cause electricity prices to “necessarily skyrocket” due to high taxes on coal.
They are birds of a (green) feather, flying into the political wind turbine of political reality as their daydreams of minimizing the amount of plant food, also known as carbon dioxide, in the atmosphere strikes rational Americans — who do drive their own cars — as economic masochism.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?