I would like to cheer President Joe Biden’s release of 50 million barrels of oil from the Strategic Petroleum Reserve to increase supply and lower consumer fuel prices. President Biden is taking a logical action, well within the scope of the federal government’s already-accepted interference in the free market in the form of hoarding several hundred million barrels of crude oil, to relieve consumers from increased prices for a basic, hard-to-substitute commodity. Unlike his predecessor, President Biden isn’t just winging some abrupt unilateral response; he worked for months to convince China, Japan, India, South Korea, and the United Kingdom to join in a coordinated release of crude stockpiles and multiply the economic impact. And rather than stoking unrealistic expectations, he’s calmly reminding Americans that this release of stockpiled crude will take weeks to trickle through the system and decrease prices at the pump.
“It’s not going to work simply because the strategic petroleum reserve — any country’s strategic petroleum reserve is not there to try to manipulate price,” Stephen Schork, editor of the Schork Report, said Wednesday on CNBC’s “Squawk Box Asia.”
Strategic petroleum reserves exist only to offset short-term, unexpected supply disruptions, he explained.
…“We are talking 50 million barrels coming out of the United States, potentially another 50 from our partners. That’s 100 million barrels of oil — that is one day’s worth of a global demand for crude oil,” Schork said [Saheli Roy Choudhury, “Oil Prices Are Headed for $100 Despite U.S. Efforts to Release Reserves, Analyst Says,” CNBC, 2021.11.24].
Why not let capitalism take its course? Instead of briefly taking the pressure off producers to meet increased supply, let’s let entrepreneurs solve the problem by investing in their own production capabilities to meet lucrative demand. Better yet, why not let rising prices encourage consumers to shift their demand in the direction that COP26 in Glasgow and President Biden’s speech thereto was all about: shifting our consumption away from fossil fuels to cleaner energy and saving the planet. We save the planet by burning less oil, not more. Instead of handing out oil, perhaps the government should subsidize electric bicycles. (See also: Great Britain, Germany, Sweden, France….)
Besides, gasoline prices creeping up past an inflationarily adjusted historical norm is not a strategic emergency. While there may be some kamikaze logic to burning up the entire Strategic Petroleum Reserve and other stocks as quickly as possible to force a transition to electric vehicles, from a strategic perspective, it would make more sense to keep the SRP taps closed and save that oil for a real emergency, like going to war to kick Russia out of Ukraine or digging giant caves to protect us from a planet-killing asteroid.
As with all other inflation issues, gasoline prices are rising because our consumption is rising. If you want lower gasoline prices, don’t look to government to solve your problem on the supply side; take action yourself on the demand side: buy less gasoline. We use ten times more gasoline per person per day than folks in China and many European countries, and we don’t live ten times better. Skip a trip, ride your bike, buy a Chevy Bolt—conservation is the real sustainable route to saving your cash and your planet.