The move's immediate lesson is that when it comes to political expediency, Al Gore has nothing on his boss. Richardson denied any intended benefit for the aspiring veep, and indeed, not only does the decision positively dwarf Gore's Thursday proposal for "several" 5-million-barrel swaps, any benefits for goosing heating-oil stockpiles are unlikely to show up until well after the election. So the administration's it-was-Bill's-idea announcement, with Al Gore nowhere in sight, may help protect the veep against George W. Bush. But it doesn't make the precedent any less shocking.
The Strategic Petroleum Reserve was created in the wake of the Arab oil embargo of the '70s, meant to keep the oil-dependent U.S. from being held hostage by Middle East ne'er-do-wells. It's been tapped only once for pricing reasons at the start of the Gulf War in 1991 (itself largely a price-control maneuver) and then only, in the end, for 17 million barrels. Now the use of the SPR has officially been expanded in the cause of keeping Northeasterners' homes heated at affordable prices in an election year.
It may work if heating-oil refineries already operating furiously at 95-100 percent capacities can somehow refine more oil in time for the cold weather. It will almost definitely push down the short-term market price of crude, just like it did in 1991, because the U.S. government has now signaled its willingness to be a ground-level player in the world's oil markets at times of "crisis." And that's precisely the problem: "Crisis" has just been defined dangerously down.
The Federal Reserve will manipulate currency markets very occasionally by buying or selling U.S. dollars, or by raising or cutting interest rates. That is part of the Federal Reserve chairman's job, as it has been since the Fed's creation some 90 years ago in response to a dire financial crisis. But the U.S. does not have an oil equivalent of Alan Greenspan, an appointed official working very closely from an established charter. Venezuela has an oil minister he's president of OPEC right now. Maybe Clinton is jealous, because the U.S. apparently has just appointed one now, just in time for the cartel's meeting next week.
Heating-oil reserves have been low, and prices sky-high, since April, when a rebounding world economy and OPEC production cuts first began to push up demand. The idea of tapping the reserve in the current climate has been around since last winter (when Gore, by the way, resisted the idea, calling it futile and short-term). Where was the administration then? Well, all summer Gore, as now, was bashing Big Oil, and Richardson, as now, was begging OPEC nations to boost production. Both men have now resorted to more practical means, and in the process discarded one more principle the separation, whenever possible, of government from the markets in favor of political concerns.
It may work this time. But what of the next comparatively mild spike in oil prices, and the next, and the next? The market will require ever-larger interventions to respond, and even begin discounting them the way they will sometimes discount Greenspan's moves. And the Fed chairman is a staunch political independent, while the energy secretary is always a political dependent. The SRP, reserved for national emergencies, stands to become a political plaything of the administration, used to tweak prices and elect vice presidents, and soon all 570 million barrels will be in play. Want to heat voters' homes this winter? Buy them some heating oil, but don't try to play puppetmaster with the markets. It's a dangerous game not fit for a Cabinet member.
George W. Bush is fond of saying the Clinton administration doesn't have an energy policy. He may have just been proven wrong. But this one makes drilling the Arctic Wildlife Refuge look positively Solomonic.