US strategic oil reserve : Uncle Sam should resist opening up the Strategic Petroleum Reserve. The US government's strategic stock only covers 38 days’ supply and so is useful only in brief and serious crises. Making it available to offset moderate but perhaps long-term supply constraints, like the current Libyan turmoil, would be premature and could even push oil prices up.
The SPR was instituted after the 1973 oil shock had demonstrated the United States' vulnerability to supply disruption. It was expanded intermittently thereafter and reached its present size of 727 million barrels in 2006. The largest strategic drawdown was of 21 million barrels during the 1991 Gulf War; another came after Hurricane Katrina disrupted supplies in 2005. Now with oil prices above $100 a barrel it seems the White House is considering whether to tap the reserve again.
Using a substantial portion of the reserve now raises the risk of its exhaustion if the current level of Middle East unrest continues. Further, since the turmoil has the potential to metastasize to include larger oil producers than Libya, even possibly Saudi Arabia, reducing the SPR now — when neither supply nor price is in true crisis territory - would be dangerous. In fact for America to open the reserve now could run the risk of appearing weak, thus causing oil market speculators to bid the price up, not bring it down.
A 28 million barrel drawdown from the SPR in 1996-97 was used to reduce the US budget deficit — and there could be similar motivations in the back of some politicians' minds today.
But in reality the oil reserve is at best an imperfect weapon against a prolonged supply disruption. Should the oil price rise further, especially without additional unrest around the Gulf, it could be addressed more effectively by raising interest rates, thereby reducing global demand and speculation. It’s also worth recalling that relatively high energy prices don’t necessarily contradict the policies espoused, at least in prior years, by President Barack Obama. Campaigning early in 2008, he conceded that introducing cap-and-trade emissions laws would cause energy prices to “necessarily skyrocket” — but that such changes were necessary. Today’s rising oil prices may not have a policy justification, but if Obama still thinks at all the same way, there shouldn’t be any need to open up the SPR.