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By Robert Rapier on Jul 16, 2008 with no responses

More SPR Nonsense

I must say that I find it amazing that the same people can argue 1). We are too dependent upon fossil fuels; 2). We must find alternatives; 3). Carbon emissions are too high; 4). We need to promote higher fuel efficiency — and then 5). We must tap the Strategic Petroleum Reserve (SPR) to bring oil prices down so people can afford to consume more. This is utter rubbish, and I have addressed this once before (including the observation that nobody seemed to fact-check the claims that the SPR was being filled at a rate of 70,000 bbl/day).

Again, what is the purpose of the SPR?

In the event of an energy emergency, SPR oil would be distributed by competitive sale. The SPR has been used under these circumstances only twice (during Operation Desert Storm in 1991 and after Hurricane Katrina in 2005). Its formidable size (700-plus million barrels) makes it a significant deterrent to oil import cutoffs and a key tool of foreign policy.

However, the calls for tapping the reserve continue to come, because high prices apparently constitute an energy emergency in some people’s minds. Here’s the latest:

Eight Reasons to Release Oil from the Strategic Petroleum Reserve

Let’s look at a couple of the reasons given:

1. Record oil prices have hurt American families

Ordinary families are struggling with record high energy prices. Many families’ gas costs have increased by hundreds or even thousands of dollars a year. The price of home heating oil has doubled in the past year. And the Department of Energy predicts that average electricity prices will increase by 5 percent this year, and go up 9 percent in 2009.

Yes, and we are seeing significant drops in gasoline demand as a result. You know what that means? The people who argue for lower carbon emissions should be happy. And the kicker of this article is that the author, Daniel J. Weiss, is “the Director of Climate Strategy at American Progress, where he leads the Center’s clean energy and climate advocacy campaign.” What’s wrong with this picture? Do climate advocates think getting people to change is going to be easy? No, there is going to be cost, pain, and inconvenience. But people respond to price. They don’t respond to feel-good speeches about the need to cut back.

Let’s look at one more:

6. There is plenty of oil in the reserve to withstand a supply disruption

The SPR has more oil than ever before—706 million barrels, which is 98 percent capacity. Selling 50 million barrels over 100 days would still leave it filled to over 90 percent capacity. This is enough oil to cope with a complete foreign supply disruption for nearly two months, assuming zero reduction in demand in the wake of such a catastrophe.

This is just an argument that the SPR is bigger than it needs to be. Yet the authorization to fill (eventually to 1 billion barrels) was made as a part of the Energy Policy Act of 2005, which received broad support. As someone who is very concerned about disruptions of future oil supplies, I want a healthy volume in the SPR. I want it tapped only in the event of something like a major supply disruption that actually threatens to sharply reduce the amount of available oil. I didn’t want it tapped at $20 oil, and I won’t want it tapped at $500 oil.

Finally, let’s not forget the history here. Chuck Schumer has lobbied to have the SPR tapped since 1999, when oil was hitting the outrageous value of $20 a barrel. He got his way in 2000, as President Clinton caved leading up to the elections. Here Schumer (and others) are at it again in 2004, which was also an election year. Oil at that time had risen to $35 a barrel. (Here’s another article from someone who recognizes Schumer’s misguided logic in tapping the SPR).

Where would we be had we heeded these perpetual calls to tap the reserve? With higher gasoline consumption, higher carbon emissions, a drained SPR, and Senator Schumer complaining about fossil fuel consumption. We would be much more vulnerable to supply disruptions, and our financial position with respect to the SPR would be billions of dollars worse off than it is now (i.e., down 100 million barrels or more from today’s level with oil at $130/bbl).

High fuel prices have led to many positive changes in people’s behaviors. Demand is down, fuel efficiency is being embraced, and sales of SUVs are down. The very same people who advocate these things are the same people who would reverse these positive changes by tapping the SPR. It appears that they don’t understand that cheap energy is the very reason we became so dependent upon fossil fuels. We won’t wean from fossil fuels if they remain cheap. As I have noted before, a big reason that Europe’s per capita energy usage is half that of the U.S. is because they have maintained prices at artificially high levels. This caused them to develop different living/transportation/consumption preferences than is the case in the U.S.

If people are forced to tighten budgets – and heaven forbid carpool, ride the bus, or simply drive less as a result of high prices – that does not constitute an energy emergency. We need to get past these ridiculous calls to tap the SPR, and highlight the inconsistencies (and past history) of the positions of those who advocate such a move.