Why tapping the strategic petroleum reserve is a bad idea
When it comes to oil, this is what the U.S. looks like to the rest of the world
The Obama administration has decided over the next two months to release 60 million barrels of oil from the Strategic Petroleum Reserve. This is kind of like giving Bubbles from the Wire $5 when he's in the middle of one of his smack binges — it's not really going to affect consumption, and it sure as hell doesn't address the root problem, which is our seemingly insuperable addiction to oil.
The general idea is that this release will drive down prices, even though that represents a drop in the ocean of global oil consumption. For reference, the world consumes well more than that amount every day — 88.4 million barrels.
As temporary fixes go, the release appears to be working already, mostly because of its affect on the psychology of traders. Aside from the fact that it's a short-sighted band-aid on a wound that requires a tourniquet, here are a handful of other reasons it's a bad idea:
1. Some day we might actually need that oil
Paul Monica of CNN Money points out that we're not in a gas crisis yet. Releasing oil from the SPR could make us look desperate. What will we do when a real oil shock comes along, as it did with the destruction wrought on refiners by Hurricane Katrina?
2. The problem is speculators, not lack of supply
"Outside of Washington, this plan doesn't make sense," David Pursell, an energy investment banker, told CNN Money. "But we don't have a shortage of crude, just a fear of a shortage. So where would you put the oil you release from the SPR?"
3. We can’t keep doing this every year
The Energy Information Administration projects that unrelenting demand from China is going to continue to push oil prices higher. So if this is the new normal, rather than a crisis, what the hell are we doing breaking the piggy bank?
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