Reuters reported yesterday that President Obama and Prime Minister Cameron inked a deal to tap into the strategic oil reserves, a move that would lower the price of gas in the U.S. during an election year. The White House denied the report, but it could potentially be a trial balloon for the administration. Today, liberal Democratic members of Congress started calling for President Obama to go ahead with the plan. The Hill reports:
Reps. Edward Markey (D-Mass.), Rosa DeLauro (D-Conn.) and Peter Welch (D-Vt.), longtime proponents of releasing oil from the Strategic Petroleum Reserve, said Friday they are gathering support for the letter and hope to send it to Obama next week. …
“We are writing you because we believe that it is essential that the United States have an aggressive strategy for releasing oil from the Strategic Petroleum Reserve to combat the speculators capitalizing on the fear in oil markets and to send a message to Iran that we are ready, willing and able to deploy our oil reserves,” the letter says.
And, of course, the plan would banish one of the major obstacles to Obama’s reelection:
Moving to tap the four giant Gulf Coast salt caverns that hold 700 million barrels of government-owned crude would still almost certainly knock global oil futures lower, delivering some relief at the pump for motorists and helping Obama in the November election if he can prevent gasoline from rising above $4 a gallon nationwide.
It would also be an unprecedented exploitation of presidential power for election-year gain. The U.S. has tapped into strategic oil reserves in the past, but only when there have been significant disruptions to the global oil supply – for example, during Desert Storm and Hurricane Katrina. This would be the first case in which the reserves would be used to deal with a politically inconvenient spike in gas prices, CNN reports:
Each case included a major disruption in global oil supply.
The market is tight today, but there is no major supply disruption to speak of.
The real driver of rising prices is geopolitical risk associated with Iran. Concerns over the country’s nuclear program have sparked a new round of sanctions by Western countries, and Iranian retaliation could put a major kink in global crude supply.
But supply isn’t being hit now, making any preemptive release look like an effort to keep the economy on solid footing during an election year.
Not only would this set an alarming precedent, it also carries risks. Dipping into the strategic oil reserves in a non-emergency situation means there will be less resources in the event of a real, long-term disruption in the global oil market – a possibility that’s not hard to imagine considering the situation in Iran at the moment.