Another element of President Trump’s proposed budget has come to light, featured this week at Bloomberg. Unfortunately, while it’s yet another effort at reducing the deficit and making the federal government more fiscally responsible (always a noble goal), it’s not really a practical one. Rolled up in a number of other energy related initiatives, Trump is proposing that we sell off as much as half of the nation’s Strategic Petroleum Reserve (SPR).
The White House plan to trim the national debt includes selling off half of the nation’s emergency oil stockpile, part of a broad series of changes proposed by President Donald Trump to the federal government’s role in energy markets.
Trump’s first complete budget proposal, released in part on Monday, would raise $500 million in fiscal year 2018 by draining the Strategic Petroleum Reserve, and as much $16.6 billion in oil sales over the next decade.
The proposal also seeks to boost government revenues by allowing oil drilling in the Alaska National Wildlife Refuge, ending the practice of sharing oil royalties with states along the Gulf of Mexico and selling off electricity transmission lines in the West. Like much of the budget, those moves are likely to face opposition in Congress.
I doubt that this idea will make it very far in Congress so we hopefully won’t need to worry about it, but I do hope that there are some wiser heads in DC who will be trying to talk Donald Trump out of pushing this idea too strongly. His proposal to open up ANWR drilling is a good one and will produce some downstream benefits so we could definitely get that one pushed through. I’m uncertain about the idea of cutting off the royalty sharing with the gulf coast states. That’s been a staple of these agreements from the beginning, largely because those are the four states which bear the brunt of the risk in case of a spill. It’s possible that they might be renegotiated, however, giving a slightly larger cut of the proceeds to help reduce the debt.
But the SPR is a different matter. We have those reserves in place for a reason and the wisdom of the decision to create the reserve hasn’t changed over the years. There’s no doubt a temptation to scale back the plan at a time when America is assuming a global leadership role in fossil fuel production, but that doesn’t mean that we couldn’t suddenly be faced with a demand surge during a crisis. Also, our successful development efforts have driven down oil prices considerably. That’s great news for consumers when they go to the pump, but it also makes this about the least practical time possible to sell of our emergency reserves. It’s just bad business all the way around.
I don’t want to throw cold water all over the President’s efforts at cost cutting. He’s got a number of excellent plans already in place which will be trimming the fat off the federal behemoth and hopefully we’ll see them pay off in short order. But we also shouldn’t let our enthusiasm for cutting costs lead us into supporting unwise decisions. We should hang on to the SPR. At a bare minimum, if you have to sell some of it, at least wait until the prices are higher.