The expected visit Wednesday from Energy Secretary Bill Richardson is, of course, welcome. His seeing firsthand the effect of OPEC’s oil trade war can only help the Northeast’s argument that he needs to do more than the ideas he has offered to date. Specifically, he needs to support the release of oil from the Strategic Petroleum Reserve.
The SPR is nearly 600 million barrels of oil held in salt mines around the Gulf States, built up since the 1973 oil embargo to protect the nation in the event of a similar oil emergency. The Clinton administration waffles on helping the Northeast, which is particularly dependent on oil, by using the SPR. Instead, it argues that “the markets should dictate prices and that the markets should flow on their own,” according to Mr. Richardson.
A nice idea, but certainly the energy secretary cannot argue that OPEC countries participate in a free and open market. With 40 percent of the petroleum market and 77 percent of the known reserves, the OPEC cartel works really well only when it ensures that market forces are held back. In this case, the OPEC nations have conspired squeezing off supply to drive up the price.
The administration further hesitates over the question of whether it has the authority to release oil from the SPR, expressing doubt over depth of the present emergency. Yet it clearly has the authority — the law merely states that to release up to 30 million barrels a circumstance “exists that constitutes, or is likely to become, a domestic or international energy supply shortage of significant scope or duration” and that taking action would reduce the impact of the shortage. If that isn’t clear enough, Sens. Susan Collins and Charles Schumer last summer introduced legislation that would spell out the administration’s authority in this matter and further directed it to release some of the oil. Had Congress acted on this measure, a good deal of the present price increase may have been avoided.
Instead, the administration’s response to the doubling of oil prices has been to urge the increase of oil production, temporarily waive certain air-pollution laws, offer loans to heating-oil dealers with cash-flow problems and increase heating assistance to the poor. But none of these do anything to break OPEC’s cohesiveness, and the last two items actually rewards it.
There is some talk of an oil swap, which allows the draw down of the reserves now for the promise of replacement oil, plus interest, later. The White House suggests this gets around the problem with its authority because a swap eventually acts as a way to put more oil in the SPR than was there before. Though it would take a month or more to get this oil to market, just the announcement that it was happening would, first, tell OPEC that the United States intended to act, and, second, allow for lower replacement costs for the oil industry, thereby dropping the current price.
If the administration is serious about the swap option, it should act immediately on it. If not, by Wednesday Mr. Richardson will find an audience in Maine eager to tell him to step on the gas.
Comments
comments for this post are closed