Obama has epiphany that the skyrocketing energy prices he called for previously are not good for re-election...
WSJ.com Review & Outlook 6/24/11
It wasn't long ago that the Obama Administration was trying to drive up the price of fossil fuels to reduce carbon emissions, promote "green jobs" and save the planet from global warming. Gasoline at $3.50 or $4 a gallon has ended that. And yesterday the White House went so far as to join a global effort to release 60 million barrels from oil stockpiles to further reduce prices.
The U.S. will release one million barrels a day for 30 days from the Strategic Petroleum Reserve—the nation's 727 million barrel oil stockpile located in salt domes in Texas and Louisiana. The spot price of oil dropped about $5 a barrel on the news, and if that decrease holds it could be the equivalent of a 10 cent a gallon reduction in gas prices.
The White House says it is taking this action because of "supply disruptions" in Libya and other countries which pose a threat to global economic recovery. But the Libyan conflict is now four months old, so Mr. Obama's falling approval ratings no doubt also provided motivation.
The SPR was created in 1975 to cushion the impact of major supply disruptions. George W. Bush drew on the reserves after Hurricane Katrina when domestic oil supplies from the Gulf of Mexico were curtailed. As a pure business decision, selling oil from the SPR when the price is high, and then replenishing the oil when the price falls, isn't a bad idea. But the effect on gas prices is temporary, as global supply and demand adjust.
One irony is that a million barrels a day is about how much oil experts believe we could be producing from the vast oil fields in Alaska's wildlife reserve. President Obama has said that tapping Alaska wouldn't affect oil prices but now says a temporary spurt will do so. How about opening up Alaska, and dropping the de facto Gulf moratorium too?
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