Last week, I predicted that if gas prices continued to escalate into the spring, we would probably see the Obama administration hint at a release from the Strategic Petroleum Reserve as a temporary intervention to avoid the political damage of high fuel costs and their multiplying effect on the economy. I was only off by a couple of months:
The Obama administration is weighing the circumstances that could warrant tapping the nation’s strategic oil reserve, Treasury Secretary Timothy Geithner said on Friday as he defended sanctions on Iran.
“There is a case for the use of the reserve in some circumstances and we will continue to look at those and evaluate that carefully,” Geithner said on CNBC television.
A handful of Democrat lawmakers have urged the White House to release some of the nation’s oil stockpiles to combat oil prices that are now topping $123 a barrel.
The SPR does not exist for the purpose of having the federal government mold the market price for gasoline. It exists to allow the US to function in cases of massive disruptions in supply. It is essentially a national-security program, not an economic program — which is why it’s curious that the White House had the Treasury Secretary floating this notion today. That should come from the Department of Energy, not Treasury.
Having Geithner broach this notion exposes Obama’s desperation. He’s going to abuse and manipulate a key strategic asset for an extremely short-term boost to his electoral chances, by making the economy look better than it really is. It’s not the first time he’s done so, either. Obama engineered a release from the SPR early last summer when prices started going up rapidly after the impact of the Japanese tsunamis started to lessen. How did that work out? As well as expected; prices rose back to the same level within two weeks of the release:
Crude raced higher Tuesday as energy bulls pushed Nymex oil back toward the $100-a-barrel mark, prices last seen before world governments said they would release crude from their reserves last month.
West Texas Intermediate jumped 2.1 percent to $96.89 a barrel on the New York Mercantile Exchange, decidedly above the $94.45 close of June 22, the day before the announcement on the release of 60 million barrels from reserves.
On June 22, the day before the announcement by the International Energy Agency that crude would be released from strategic reserves, it was at $95.41. It hit a low close of $90.84 on June 27.
Within six weeks, gas prices had gone even higher. That’s because a one-time release of oil equal to the US demand for less than two days does nothing to change the market dynamics of supply and demand over any significant period of time. Obama has steadfastly refused to put more supply on the market in the long term by opening up American domestic extraction and refining, which is why he’s having to fall back to another pointless Hail Mary so soon after his last attempt failed.
The failure to understand supply and demand is evident from this chart, developed by Speaker John Boehner, which matches up the average price of gasoline over the last three years to the steps taken by Obama to block America from increasing its production:
That will be the record Obama has to defend, and which he hopes that an SPR release will keep on the back burner.