Something’s Got To Give!

Let us count them. We are referring to the ways in which Washington chronically and egregiously makes a mockery of sound economics.

Take the Biden Administration’s wanton depletion of the nation’s strategic petroleum reserve (SPR), for example. That’s supposed to be a last resort national security asset, designed to protect the US economy from major global supply disruptions. And by “major” we mean a sudden 15-30% or higher loss of production, which would cause prices in the short-run to soar to $200 or even $500 per barrel.

Moreover, on this matter we know whereof we speak. It happens that we were on the US House of Representatives energy committee in the early days of SPR during the 1970s. And we also led the charge in the Reagan White House in behalf of an ample SPR as a national security alternative to massive subsidy and regulatory schemes designed to artificially attain national energy autarky at huge fiscal costs to Uncle Sam and sweeping distortions of the private energy economy.

However, the one convincing argument against the SPR strategy as a least-worst alternative to the Carter Administration’s energy boondoggles and BTU regulatory schemes that reached all the way to energy efficiency standards for toasters was that someday an irresponsible White House or Congress would turn the SPR into a political football. That is, release large amounts of stored crude oil in order to artificially depress gas prices at the pump to please the voters, even in the absence of a major global supply emergency.

Needless to say, that’s exactly what has happened on Joe Biden’s watch. We would be happy to provide a magnifying glass to anyone who claims there has been a major supply disruption since January 2021 because you can’t find it in the chart below.

Global crude oil production was about 75 million barrel per day (mb/d) when Sleepy Joe took the oath of office, and with only teeny-tiny squiggles since then has marched steadily higher, standing currently at about 82 mb/d (total global petroleum supply is about 100 mb/d when you count NGLs and lease condensate). So essentially the huge SPR release of 1 mb/d during 2022 was aimed at no good purpose—other than electing Democrats in the mid-term elections last fall.

World Crude Oil Production data by YCharts

As Bloomberg noted in a recent post, while it took the Biden administration barely six months to drain the US oil supply down to a 40-year low, it will likely take decades to refill the SPR— if that happens at all.