In recent weeks President Biden’s use of our “Strategic Petroleum Reserve” (SPR) to lower gasoline prices has gotten a lot of attention. Many commentators have rightly criticized the political motivations involved (temporarily lowering prices to win votes during a midterm election). But I think Biden’s use of the SPR is actually far more unethical and dangerous than a mere vote-getting exercise. This week’s Energy Talking Points are designed to tell the full truth about what is happening.
Instead of using the Strategic Petroleum Reserve (SPR) to protect America’s oil security, the Biden administration is abusing the SPR to harm America’s oil security: depleting it when there isn’t a security threat to cover up the disastrous cost of his anti-oil policies.
- The purpose of the SPR is to aid the US in securing a reliable supply of oil and oil fuels by providing an “emergency” stockpile of up to 1/10th of US oil consumption—to be used during (and refilled after) major “interruptions” of supply such as “sabotage” or disaster.1
The core of oil security is a government that facilitates a reliable and affordable oil supply by giving industry the freedom to invest in, produce, refine, and transport oil.
Without this freedom the SPR’s stockpile of 1/10th (max) annual consumption can’t make us secure.2
- Instead of protecting oil security, Joe Biden and anti-oil politicians around the world have gravely harmed it for 15+ years by restricting oil investment, production, refining, and transport. We can now see this in Europe’s (and our) vulnerability to Russia and in rising prices.3
The proper response by Biden to Europe’s and our vulnerability to Russia and to rising oil prices would have been: apologize for supporting anti-oil policies and lead a reversal of them to minimize further damage to our security and economy.
He chose instead to abuse the SPR.
The over 638 million barrels of oil in the SPR when Biden took office were supposed to be used for “emergency” “interruptions” such as “sabotage” or disaster.
Today’s situation does not qualify: it is essentially a long-term oil security and price problem caused by anti-oil policies.
- If not for global anti-oil policies, Russia’s Ukraine invasion and the subsequent embargoes would be much less consequential. Indeed, they would have been an opportunity for US producers to grow their market shares, as they did in the recent past when breaking the OPEC+ cartel.
- Instead of responding to artificially high oil prices, a consequence of anti-oil policies, by leading a reversal of their cause, Biden chose to conceal this consequence by depleting our SPR, which is now down to its lowest level since the early 1980s, to temporarily cut prices.
- Even when full (714 million barrels), the SPR contains only 1/10th of US annual oil consumption (>7 billion barrels) and now it contains 1/18th (~400M barrels). This means less oil for emergencies such as terrorist attacks or cyberattacks on US oil production, refining, or transport.4
- There is a lot of uncertainty ahead for US oil security. In additional to the threats of terrorism and cyberattacks, and the ever-present possibility of a natural disaster, there is the possibility of an escalation of conflicts by Russia or China. We want our oil stockpile full.
- Biden’s depletion of the SPR is not only a security threat but also an economic threat. If oil prices stay high, which Biden’s and other anti-oil policies make more likely, refilling the SPR could drive them significantly higher and create a global price shock.
- Instead of depleting the SPR when not necessary and risking the need to refill it at high prices, government should only deplete the SPR when necessary and quickly refill it when oil is cheap. Sadly, in 2020 Congress blocked refilling the SPR at $24 per barrel, crying “oil bailout.”5
- Biden’s goal in dangerously depleting the SPR is clearly to lower gasoline prices to help his party’s election prospects—the same goal he had when he asked OPEC+ to delay production cuts for just one month so that subsequent price increases would happen post-election.6
- Depleting the SPR to lower prices for political gain is not only unethical and dangerous short-term, it is unethical and dangerous long-term because by hiding the consequences of his anti-oil, anti-security policies Biden is able to get away with doubling down on them.7
- Observe that Biden’s SPR abuse has been coupled with an unapologetic increase in anti-oil policies. Just this week he proposed a “windfall profits tax” to further punish an industry he has already been attacked on every front (investment, production, refining, transport).8
- Biden accusing companies of not investing enough “windfall profits” is yet another denial tactic. For 15+ years anti-oil politicians have done everything they can to make new oil production unprofitable—discouraging investment. Taxing profits more discourages investments more.9
President Biden is not using the SPR to protect America’s oil security.
He is abusing the SPR to harm America’s oil security, by depleting it when there isn’t a security threat to cover up the long-term security threat—and high cost—of his anti-oil policies.