Crude policy

The Strategic Petroleum Reserve was created after the Arab Oil Embargo of 1973-74 to ensure that never again would the United States be so vulnerable to market manipulation and politically driven supply interruptions. Today, more than a half-billion barrels of crude slosh around in storage reservoirs clustered around the Gulf Coast, ready for an emergency.

According to many Northeastern members of Congress, including Maine Sen. Susan Collins, an emergency is here. The price of heating oil has nearly tripled in the past year, OPEC is maintaining its first sustained production cutback in decades and, baby, it’s cold outside. These lawmakers say just a small release from the SPR to the marketplace, a mere 2-to-3 percent, would ease prices and, more importantly, ensure that no one’s tank runs dry.

But the Clinton administration — Energy Secretary Bill Richardson in particular — calls the current situation uncomfortable and unfortunate, but hardly an emergency. A new proposal to release a small amount of SPR oil now and to allow the Department of Energy to delay replacing it until prices drop is getting a cool reception. “Right now we are not going to be assessing whether this is needed or not because there is no immediacy to making this decision,” says Secretary Richardson.

The administration position that the SPR is for emergency use only would be fine if the administration would pick a position and stick with it. The last time any reserves were released to meet a true crisis was during the Gulf War in 1991, a crisis that failed to materialize. The last time SPR reserves were released, period, was during fiscal year 1996-97, when the Department of Energy needed to balance its budget.

In that context, the current policy of refusing to release even a small amount of the reserves bears an uncomfortable resemblance to hoarding, and the rationale, that every drop must be saved against some inevitable OPEC outrage, smacks of fear-mongering. The administration’s appropriation of $45 million in low-income home heating aid will help the poor temporarily, but it does nothing for the middle class or for businesses. And, ultimately, the big losers in an economic downturn are always the poor.

When OPEC curtailed production a year ago, oil was going for $8 a barrel, far too low for the 11 member nations in the Middle East, Asia and South America to sustain themselves economically. While oil-consuming nations have nothing to gain from economic depression and political turmoil in the producing nations, the current price, in the $28 range, is far too high for those on the demand side of the supply-and-demand dynamic.

That dynamic only works when both sides recognize their mutual interests. OPEC is not a renegade cartel bent upon world domination, as the administration’s current doomsay policy seems to suggest. It is a business trying to pay its bills.

The OPEC ministers meet again in March to evaluate the production cutback and already some are saying the sharp spike in prices, driven in part by a recovering Asian economy and development in the former Soviet bloc countries, justifies a production increase. A modest SPR release of 10 million to 15 million barrels, would convey the message that the Clinton administration has enough confidence in OPEC that the United States will use a small part of its own supply to meet its current demand. And it would make this cold snap much more bearable.