Oil Reserve Can Wait
By INVESTOR’S BUSINESS DAILY | Posted Friday, March 07, 2008 4:20 PM
Energy Policy: OPEC has snubbed President Bush’s plea to boost production and give Americans relief at the pumps. Adding insult, oil sheiks say Bush has mismanaged the crisis. Time for some unilateral action. A clearly frustrated Bush lashed out at the monopoly, warning: “I think it’s a mistake to have your biggest customers’ economies slowing down as a result of higher energy prices.”
But the gripe only confirmed U.S. impotence, which frankly has been compounded by empty White House policies to deal with the crisis.
With oil prices jumping to a record $106 a barrel, Americans are now suffering from an energy shock not seen since the 1970s — the last time OPEC had us all over a barrel.
Groveling before the Arabs didn’t work. So what’s Plan B? “America’s got to change its habits,” Bush said Wednesday as prices hit an inflation-adjusted record. “We got to get off oil.”
Pardon us for saying, but hearing this Texas oilman complaining “America’s got to get off oil” sounds like Frito Lay denouncing trans fats.
It also sounds condescending, sorely out of touch with the pain the average consumer is enduring. He might as well have shrugged: If they ain’t got gas money, let ’em ride mopeds.
Lame duck or not, Bush better do more than just shrug. There’s a good chance oil could continue rising to as high as $120 in the near term, according to some forecasts, despite slowing economic growth and demand.
Goldman Sachs, a widely watched oil price prognosticator, predicts oil could average $110 a barrel through the next inaugural. That’s not a good note to go out on for Bush, who’s worried about his legacy.
In turn, a number of analysts are predicting $4-a-gallon gasoline, news that made headlines late last month. Astonishingly, Bush was surprised to hear the figure at a White House press conference. “That’s interesting,” he said. “I hadn’t heard that.”
He went on to make a strong point, however, that Democrats and environmentalists have blocked his proposals for drilling for new supplies at home, including the Alaskan wildlife refuge. And he rightly argued their solution of taxing Big Oil will only drive prices higher by discouraging exploration and development.
Barring domestic drilling, Bush said his energy policy was focused on “renewables,” such as ethanol, and “conservation.”
This thin-beer policy is spelled out in detail on the Energy Department’s home page, which looks more like the Sierra Club’s Web site. There, you’ll find a campaign called “Change a light, change the world,” which encourages Americans to switch out their incandescent bulbs to energy-saving compact fluorescents. Somehow we doubt this will change the world.
Oil apparently is a dirty word at DOE; you won’t find it mentioned anywhere on its home page.
Focusing policy on biofuels such as corn-based ethanol isn’t going to solve the problem. In fact, it’s making it worse. Food prices are skyrocketing alongside gas, thanks to the ethanol boom. The price of corn has doubled in the past year, which has driven up feed costs for poultry, beef and pork.
What’s so maddening is that while DOE is obsessed with the long-term prospects of renewables and conservation, it could be easing energy prices right now by just changing its Strategic Petroleum Reserve policy.
The administration refuses to stop withdrawing oil from a tight market to fill the reserve, even though doing so is driving prices higher. Goldman estimates that filling the reserve has raised oil prices by as much as $6 a barrel and 25 cents a gallon at the pump.
The SPR is more than 95% full right now. Freezing new additions until prices fall to about $75 a barrel shouldn’t pose an energy security concern.
In fact, Bush could even authorize a release of millions of barrels of oil from the reserve to help ease crude prices. When DOE did it after Katrina, crude prices dropped by $5 a barrel. When the agency did it in late 2000 to alleviate the threat of a home heating oil crisis due to low inventories, prices fell $6 a barrel.
With so many American consumers hurting from the gas crunch, the president needs to do more.