If oil supplies were to suddenly grow, those prices might well decline. That is why, according to unnamed sources, his administration is reportedly considering selling some of the oil stowed in the nation’s Strategic Petroleum Reserve and urging U.S. allies like Saudi Arabia to pump more oil.
Should Trump attempt to lower gas prices to gain favor with voters, it wouldn’t be the first time a president has tapped the strategic reserve in advance of an election. But it would be the first time such a move was made solely for political reasons. And I believe it would be a particularly cavalier action in light of Congress’ recent moves to sharply reduce the amount of oil in the reserve and the energy insurance it’s provided for over three decades.
Congress and President Gerald Ford’s administration created the Strategic Petroleum Reserve in the mid-1970s to insulate the country from oil supply interruptions.
At the time, the U.S. had become much more reliant on imported oil. And there were deep concerns about supply interruptions because in 1973, the Arab members of the OPEC oil cartel imposed an embargo on countries, including the U.S., that were supporting Israel in the Yom Kippur War.
Crude oil prices out of the Middle East quadrupled in just a few months, pushing up prices at American gas pumps.
Since that energy crisis, the federal government has made achieving U.S. “energy independence,” or at least resilience, a top priority.
Over the decade following 1975, the government built the reserve in roughly 60 caverns hollowed out of underground salt domes at four sites in Texas and Louisiana. The U.S. also has become one of about 30 industrialized, oil-consuming countries that maintain emergency oil supplies around the globe and coordinate responses to future disruptions, like those following the revolution in Libya in 2011.
But the release that the Trump team is reportedly mulling appears to be timed not for a petroleum shortfall but to make voters feel less pinched when they fill their tanks – or fill out their ballots.
If that happens, without any verifiable supply bottlenecks, it would mark an unprecedented attempt to benefit the party in power by temporarily cutting gasoline prices – or at least to persuade voters that the administration is trying to make that happen.
The closest parallel of a contested election-year release happened in 2000, when then-President Bill Clinton released 2.7 million barrels of reserve crude – and later 30 million additional barrels – to relieve a shortage of residential heating oil in the northeast.
Critics decried the moves as ploys to aid the presidential campaign of then-Vice President Al Gore, who had called for such a release. But, unlike the situation today, a bipartisan group of lawmakers from oil-consuming states had demanded it and public support was solidly behind it.
Among those who criticized Clinton’s move was then-presidential candidate and former oilman George W. Bush. After assuming office in 2001, the second President Bush sought to fill the reserve to full capacity for the first time and only release oil during emergencies when refineries could not buy crude, and not simply because of high prices, no matter how much of an economic hardship these prices imposed.
On his watch, that meant selling some of the oil after Hurricane Katrina interfered with refining along the Gulf Coast. In Bush’s 2007 State of the Union address, he called for the reserve to be doubled to 1.5 billion barrels, but Congress rejected even smaller increases almost unanimously as uneconomical.
Another difference from past emergency reserve releases, should there be a sale soon, is that domestic oil production has risen sharply in recent years due to technological innovations like hydraulic fracturing and horizontal drilling.
That growth – which brought the country’s dependence on imported oil to a 50-year low in 2017 – has made many politicians believe that maintaining more than 700 million barrels of oil has become an unnecessary extravagance.
In fact, Congress has already mandated the gradual sale of some 300 million barrels of this oil over the coming decade. The proceeds would fund either unrelated spending, deferred maintenance on the reserves themselves, or pay for revenue lost from the assorted tax cuts that took effect in 2018. These reductions may make the country less prepared to deal with real supply disruptions in the future, like a catastrophic Iranian-Saudi Arabian war.
Anticipating these reductions, in July, House Republicans began discussing plans to lease or even sell storage space in the reserve to private companies.
Further distinguishing a fall release from previous ones, U.S. refineries are currently running at nearly full capacity, raising questions of how selling this oil would even benefit consumers.
It is possible – and in the context of global warming, desirable – that someday, the U.S. economy will no longer rely on petroleum and therefore will have no need for a Strategic Petroleum Reserve. Until then, I do not see how it can make sense for political opportunism to influence the nation’s energy strategy.
Peter Shulman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.