President Biden plans to release 50 million barrels of oil from the Strategic Petroleum Reserve. The hope was to reduce gas prices, but this is such a small amount that it won’t reduce prices for long, or by much. And there is too little in the reserve to have a long-lasting effect on gas prices.
As Hot Air’s Ed Morrissey notes, this release is insignificant as
as spitting into the ocean….Fifty million barrels of oil sounds like a lot, right? It’s not — at all. In 2020, when consumption hit its lowest level in a quarter-century, the US consumed 18 million barrels of oil a day. Don’t take my word for it; the US Energy Information Administration has this data easily available. And that was after the largest single-year decline in consumption in US history to boot…Essentially, Biden has supplied enough oil to bootstrap consumers for the weekend.
But Biden doesn’t have much choice. The reserve itself isn’t very big, thanks to the Democrats’ past mistakes. And he can’t use it all up to counteract high gas prices, because we might need the reserve for a future crisis, like if a war or natural disaster shuts down major sources of global oil production.
Thanks to Senate Democrats like Charles Schumer (D-NY), America lost billions of dollars by not refilling or expanding its strategic petroleum reserve in 2020 when oil was dirt cheap. Now, oil is more expensive, around $80 per barrel. But there is too little in the reserve to have much effect on oil prices, and oil prices could be even higher — as high as $120 — next year, making it dumb to sell oil now.
In mid-2020, oil prices actually briefly went negative, to minus $37, due to production exceeding needs and capacity. Oil prices were below $30 per barrel for months. President Trump proposed adding oil to the strategic petroleum reserve when oil cost little or nothing, but Schumer and Senate Democrats vetoed it.
Not buying the oil cost the US government billions of dollars because oil’s price is now near $80 per barrel, at least $50 more than it would have cost. If America had expanded the reserve’s capacity, and bought billions of barrels of oil for $30 or less back in 2020, it could sell those billions of barrels now for a $50 per barrel profit, making tens of billions of dollars. A basic rule of investing is to buy low and sell high.
But the oil reserve is not full, and no effort was made to expand its capacity when oil prices were low.
Moreover, at around $80 per barrel, oil is still at less than half its 2008 peak. In 2008, oil reached $140 per barrel, which would be about $180 today, after adjusting for inflation. So although oil prices are somewhat high, there is no emergency requiring that the U.S. sell the modest amount of oil it has.
Yet, Bloomberg News reported that on November 14,
Senate Majority Leader Charles Schumer urged President Joe Biden to tap the U.S. government’s reserves of emergency fuel to help lower gasoline prices.
“Consumers need immediate relief at the gas pump, and so I am urging the administration to approve fuel sales from the nation’s Strategic Petroleum Reserve,” Schumer, a Democrat who is New York’s senior senator, said at a news conference Sunday.
“The president has made clear that all options are on the table,” Brian Deese, director of the White House National Economic Council, said on CNN. “We’re monitoring the situation very carefully.”
Gasoline prices at a seven-year high, along with surging costs for shelter, food and vehicles, have contributed to a spike in inflation. The consumer price index increased 6.2% in the 12 months through October, the fastest annual pace since 1990, according to Labor Department data released last week.
Back in 2020, Senate Democrats forced Trump to remove an authorization to expand the strategic petroleum reserve from the coronavirus relief bill, and boasted about it. As I noted at the time, “Their obstruction will likely cost America billions of dollars in lost profits.”