Less than a year ago — in June 2011 — the Obama Administration decided to release 30 million barrels of oil from the Strategic Petroleum Reserve. This amount was matched by 30 million barrels from the International Energy Agency members. The decision was prompted by the threat that crude exports from Libya could be hurt by the civil war there. Within a little over a month after the announcement, the price of WTI fell from about $100 to just above $80. The impact of the decision may have been as much psychological as a matter of supply and demand. Whatever the reason for the outcome, it is time to make the same decision again.
The SPR contains approximately 700 million barrels. A release of 10% of that amount, in concert with another action by the IEA, might not push crude to $90 or $95, but it could stop the move that has taken the price from about $94 to $110 in less that three months. To consumers and business that are threatened by $4 a gallon gasoline and higher prices for industrial oil and petrochemicals, the decision would say that the U.S. government will not stand idly by as concerns about Iran and a possible blockade of the Strait of Hormuz push WTI crude to $120 or higher.
How does a decision to release several tens of millions of barrels from the SPR hurt the White House? It is difficult to come up with a reason. The federal government has the money to replace the crude over time, even if the price is higher than the one that it paid to get the level of the reserve to where it is today.
If this is not the time to take a modest risk with the plan to bring down crude, when is?
Douglas A. McIntyre