Mohammed Al Hamli, minister of energy for the United Arab Emirates, recently said it is a “myth” that the world’s largest oil cartel reduces oil production from its member states in order to drive up the price. “Often, members step in to shield the market from the impact of global emergencies or geopolitical tensions, such as the two Gulf wars and the strike that paralyzed oil production in Venezuela in late 2002.” He complained in a speech that the press unfairly characterizes OPEC, of which the U.A.E. is a prominent member.
Here’s a different take on recent events. Operation Odyssey Dawn in Libya has done little to restart that country’s oil exports. Japan, which has lost some 12 gigawatts of steady power supply from the demise of nuclear plants on its eastern shore, according to a Bank of America report, is relying on fossil fuels like oil to help meet its power needs.
Meanwhile, prices for Brent oil, the benchmark in Europe, have risen to more than $120 a barrel. Yet OPEC has made little progress in releasing more fuel onto the world market. Far from shielding the market from global emergencies, the mega-billionaire sheikhs of OPEC continue to capitalize on their cartel’s stranglehold on the bulk of the world’s supply.
It’s high time Uncle Sam took advantage of the oil he’s been sitting on for the past half century. Not the black gold sitting miles beneath North Dakota and Alaska that President Obama stubbornly refuses to drill for. There’s oil that’s far more accessible: the Strategic Petroleum Reserve, a vast, Cold War-era stockpile of oil in caverns underneath the Texas and Louisiana coastlines.
The SPR contains 727 million barrels of crude in both the sour and sweet varieties. According to the Department of Energy, the United States has spent about $17 billion piping the oil into its subterranean caverns as well as another $5 billion excavating the caverns themselves. Still, with Brent spiraling upwards to an almost certain price of $140 a barrel in the next few months, the national stash – even accounting for the $22 billion investment – would be worth more than $80 billion on the open market.
The economic impact of a full drawdown, however, is well beyond that $80 billion market value. It’s incalculable. Imagine the country using its own oil to power itself for 75 straight days, which is how long 727 million barrels of crude would last us, according to the Department of Energy. The president can order a full drawdown of the stockpile if he deems that a “certain increase” in the price of oil is likely to cause a major, adverse impact on the national economy.
With Libyan oil out of production and Japan in great need for emergency fuel, now’s the time for the United States to use its own oil. It’s a stash 60 years in the making that will insulate the American economy from the adverse effects of a ruthless cartel.