Friday, July 25, 2008

The Strategic Oil Reserve: A Matter of National Security

Don’t Mess With the Strategic Oil Reserve

Nancy Pelosi and other Democrats on Capitol Hill are demanding that President Bush should release petroleum from the Federal Strategic Oil reserve so that in theory the extra supply could serve to help drive down prices. The reserve was created in 1975 by the Energy Policy and Conservation Act (EPCA) to create an emergency inventory of oil to provide a continuous fuel source with a current capacity of around 700 million barrels of oil in the event of a national emergency, a serious interruption in supply, so the nation’s economy could still function for an extended period of time while hopefully the potential issues causing the shortage are resolved.

One application of releasing fuel from the reserve came in 2005 after Hurricane Katrina shut down oil platforms in the Gulf of Mexico and caused damage to oil processing infrastructure in the region. By law, the President can only draw from the reserve supplies for true supply emergencies. There is no authority in the law to release oil to influence rising oil prices. In essence, the Speaker of the House is imploring the President to break the law. The only way the use of the Strategic Oil reserve could be changed would be through legislation passing both houses of Congress and the President signing it into law. Has Ms. Pelosi or her colleagues in the Senate introduced such legislation? Of course not.

The real essence is political. In her pleadings to utilize the Oil Reserve, Speaker Pelosi creates an unrealistic (and illegal) expectation. We have oil and we’re not using it creating the impression that the evil Bush administration who she has held responsible for everything that’s wrong with the world as recent remarks to the media would suggest.

If the President had the ability to put oil from the reserve into the domestic oil market, that would be an unwise decision. So many potential disruptions in supply are only one episode away from becoming a reality. Given the behavior of Iran leader, Ahmadinejad, the prospect of the closure of the Straight of Hormuz, a 21 mile wide sea passage dividing Iran from the Oman is a real and ominous fear. Forty percent of the world’s oil supply transports through the Straits. Any disruption could have a catastrophic effect on the world’s economy sending the major economies into a mad scurry to resolve the problem.
Meanwhile, Hugo Chavez, the unstable crazed dictator, of Venezuela has threatened using his oil as a weapon, our supply from those oil reserves could be one provocation away from being shut down. Additionally, numerous oil exporting countries either have unstable governments or are high-risk terrorist targets. Al Qaeda would not miss an opportunity to wreak havoc in the Saudi oil fields if given the opportunity. Additionally, with August and September approaching, that’s prime hurricane season in the Gulf of Mexico.

The situations cited above reveal the wisdom of our government creating huge oil reserves as not simply an economic necessity but also a matter of absolute national security. Tapping those reserves could be foolish leaving our country empty handed for options if any of the problems above were to materialize with a diminished oil reserve. the oil shortages in the 1970’s gave America a hint of some of the difficulties supply disruptions could hurl upon us. However, the percentage of imported fuel was much lower then. Now it far exceeds 60%.

The reasoning for maintaining the Strategic Oil Reserve is sound and obvious. Messing with this all important national resource would be at best a ill-advised quick fix with the possibility of catastrophic unintended consequences. Creating false hopes exploiting this valuable resource distracts from the hard realities and tough choices our elected leaders are failing miserably to face. Maximum effort must be devoted at once to produce the maximum amount of domestic oil possible to reduce our dependence on foreign oil often provided by nations that are no friends of the United States. Realizing that regardless, oil is a finite resource that is not good for the environment, massive efforts must be dedicated to developing new fuel sources and technologies and utilizing ones that are not currently being used advantageously such as nuclear power for electricity generation. Every day that goes by without addressing this problem makes the solution that much more difficult, demanding, and expensive.

Sadly, both Democrats and Republicans would rather play politics with the Democrats living in a fantasy world that massive efforts to harvest more oil isn’t absolutely necessary NOW. The goals and policies that guided energy production when gas was $1.50 a gallon addressed a very different reality than we face now. Every thing we do whether it’s the use of oil products in manufacturing or anything that needs to be transported is at stake. The public should take note of which elected officials are the obstructionists and deal with them accordingly in the upcoming election.

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