The Strategic Petroleum Reserve is 570 million barrels of crude oil stored in huge salt domes along the Gulf Coast. It was created by Congress in 1977 in the wake of the Arab oil embargoes of the '70s, as a resource to counter major supply disruptions that threatened national security.
Has it ever been tapped before?
Only once, for pricing purposes, during the Gulf War in 1991, when Iraq's invasion of Kuwait threatened supplies from that country and Saudi Arabia. The government issued only 17.3 million from the reserve, and it worked — crude oil prices, which had been climbing, fell sharply on the news.
Why is the Clinton administration tapping it now?
To get Al Gore elected, of course, but also to head off a spike in home heating-oil prices that's set to hit this winter. It also hopes to take the price of crude oil down a few notches and thus reduce prices at the pump. "This is the right time to do this," Energy Secretary Bill Richardson said in announcing the measure. He acknowledged an increase in oil production by the Organization of Petroleum Exporting Countries, but said "tremendous demand" for oil has muted the benefits of that increase. Richardson said releasing 30 million barrels of oil into the market will likely add an additional 3 to 5 million barrels of heating oil this winter.
The administration's plan is for a 30 million-barrel "swap" (dwarfing Gore's plan to offer "several" of the 5 million-barrel kind ) in which crude oil is delivered to oil companies to be sold at current prices and returned to the reserve at a later date, when it costs them less. (Hardly getting tough on Big Oil, but that's besides the point this time.) The idea was first floated by officials in the Clinton administration, where it's the subject of heated debate, and given to Gore to take to the voters. Then, apparently to save Gore from Bush's charges of hypocrisy — last winter, Gore himself had resisted tapping the reserves, saying that OPEC could nullify the effects of any oil release by simply cutting back on production — he now says the current situation demands that risk be taken.
Could it work?
The oil itself wouldn't reach the heating-oil dependent Northeast in usable form for 40-50 days — 15 days to ship to high bidders, a week or two for shipping, another 10 days for refining. And while heating-fuel inventories are low this year and prices up 70 percent — largely because of April's OPEC production cuts and increased worldwide demand (credit economic recoveries in Asia and the continued boom in the U.S.), most heating-oil refineries are at near-maximum capacity. More crude oil won't help the refineries produce any more heating oil in time for the cold weather. Richardson Friday predicted an additional 3 to 5 million barrels of heating oil this winter; if the refineries manage to rise to the occasion, he might just get it.
The best the plan could accomplish now is a short-term drop in crude-oil market prices, some by increasing actual supply but more by raising the specter of future, greater intervention. (Witness Thursday's $1.24 drop to $34 a barrel on Gore's speech, a day before the Clinton administration even spoke up.) Such psychological manipulations won't heat any homes until after Election Day, but could give Gore something to brag about in October.
If it's that easy, what's the problem?
That's just it. Manipulating oil prices with government intervention is a lot like what the Fed does with currency reserves or interest rate policy. The problem is, it's highly questionable whether the oil markets are the government's business. There's no Alan Greenspan of oil. Each time such an intervention (or the threat of one) is issued, its impact is lessened. Pretty soon, the Strategic Petroleum Reserve is just another arm of U.S. oil supply, and politically subject to every market whim. That's far from its original purpose.
How does this rate as an election issue?
Pretty high, seeing how the chances of an incumbent-party candidate like Gore tend to rest on the country's economic mood. These are pocketbook issues in pocketbook times. But while Bush accuses the administration of not having an energy policy, Bush-Cheney's — drilling in the Arctic National Wildlife Refuge in Alaska, plus some big-stick diplomacy of the kind at which Bill Richardson has been failing at for some time — hardly tops it for long-term wisdom or environmental friendliness.
Bush may score points for decrying the administration's scantily clad expediency, but if voters see the veep as genuinely trying — for whatever motive — to help them heat their homes this winter, they're likely to give him points for effort and damn the larger principles at stake. When it comes to their wallets, the electorate can be pretty expedient too.