President Barack Obama hails from Chicago, so maybe that explains his surprising impulse to play commodity trader.
His decision announced Thursday to tap America’s petroleum reserve is a misguided attempt to exert control over the global market for oil. If it’s intended to rev up the sluggish economy, as senior White House officials suggested, it won’t work.
The White House acted in concert with the International Energy Agency and other oil-consuming countries, agreeing to provide half of a 60 million barrel planned release. The U.S. and its allies attributed their move to the loss of Libya’s exports for the past three months. The president also may be worried, with some justification, that Americans will blame him for sticker shock at the pump when they take to the roads on summer vacations.
Oil prices plunged Thursday, as the president evidently intended. But consumers may not save much at all. While the U.S. plan to release a million barrels of oil per day over the coming month might sound impressive, the U.S. sucks down oil at a daily rate of 19 million barrels. U.S. refiners already have all the crude they can handle, so dipping into the stockpile is unlikely to make a big difference:
We’re talking pennies at the pump, not dimes.
Even if the potential savings were greater, this move would be a mistake. Our nation’s oil reserve is set aside for emergencies — real emergencies, that disrupt supplies. Think Hurricane Katrina, which shut down production in the Gulf of Mexico. Or Iraq’s invasion of Kuwait, one of the world’s leading producers. Hoarding oil at taxpayer expense makes sense only if America uses its inventories to reduce the short-term impact of unpredictable events such as those.
Today, we have no emergency. Prices at the pump have been inching down for weeks. By releasing oil from the reserve, the president has left our nation more vulnerable if another hurricane or a new crisis in the Middle East triggers a genuine oil shortage.
The president also underestimates the long-term cost of his inconsistent economic policies. Business doesn’t like surprises that distort the marketplace and contribute to volatility, making it difficult to plan ahead. Just one day before the oil-reserve announcement, shipping company FedEx Corp. reported stronger earnings and a robust outlook for the coming year. FedEx is highly dependent on fuel prices, but it was managing. It didn’t need President Obama to intervene.
Administration officials said Thursday they will consider additional steps to keep down the cost of oil. That could mean selling off more of the strategic reserve if this initial gush makes barely a ripple.
Here’s an idea: Instead of messing with commodity markets, take off the trading jacket and get to work on a sensible, comprehensive, job-friendly energy policy.
