Submitted by QTR's Fringe Finance
Yesterday, an apparently fake headline circulated on Twitter (or X, or whatever the f**k it’s called this week), alleging that President Biden was open to “depleting” the Strategic Petroleum Reserve due to rising oil prices.
Many quickly accepted the headline as genuine, perhaps because it sounded precisely like something President Biden might say. I spent some of the afternoon looking for the source and it was not The Wall Street Journal, as claimed on Twitter.
Though the headline was fabricated, it almost doesn’t even matter at this point. President Biden has made it clear that tapping into the Strategic Petroleum Reserve is perpetually under consideration, undoubtedly because oil prices (and the prices of everything, i.e. inflation) have become a headline issue in the upcoming presidential election.
In essence, the lower oil’s price is, the easier it is for President Biden to claim success in fighting inflation. Reduced oil prices also enable leftists to argue that limiting drilling domestically does not adversely affect consumers and therefore, we should all do whatever the f**k they want at any and all times, including cheering them on while they deface priceless historic works of art, all in the name of sacred “climate change.”
However, by perpetuating this oil price “solution” charade with a series of short-term fixes, the administration sacrifices our country’s long-term goals, ultimately causing more harm than good.
As Jim Bianco correctly noted on Twitter yesterday, the SPR was created to prevent supply shocks (i.e. shortages of actual oil) that the U.S. saw in the 1970s — not to manage prices of ample supply.
And then there’s that pesky term “strategic” that keeps popping up.
Has “The Big Guy” ever asked himself what that word means in the context of the Strategic Petroleum Reserve? After all, it’s not just the petroleum reserve, it’s the strategic petroleum reserve.
Oxford defines the word as “relating to the identification of long-term or overall aims and interests and the means of achieving them”.
The word implies long-term planning, something evidently lacking in the administration’s approach. Their decisions instead seek short term political currency by depleting our national reserve, meant for emergencies, not market fluctuations. Price serves as a rationing mechanism and government interference distorts this natural function.
I am once again reminded of the chief reminding Marcus and Mike in Bad Boys 2 of the meaning of the word “tactical”.
“What’s your job description? What is your job description,” the public asks Biden as the SPR lays bone dry.
“Tactical narcotics team! Key word: tactical! Displaying finesse and subtlety in achieving the goal! Tell me gentlemen, what was subtle about your work today? 42 cars - and a boat!”
“Strategic petroleum reserve. Key word: strategic! Definition: relating to the identification of long-term or overall aims and interests and the means of achieving them. Tell me President Biden, what was long-term about defiling the corpse of the strategic petroleum reserve to get gas prices down $0.10 for 10 minutes?”
Not only is the move not “strategic”, it makes us look vulnerable on the world stage.
Ironically, Prince Abdulaziz bin Salman tried to warn us back in late 2022 that emptying our Strategic Petroleum Reserve (SPR) was a stupid idea to try and “temporarily” fix oil market prices.
"People are depleting their emergency stocks, had depleted it, used it as a mechanism to manipulate markets while its profound purpose was to mitigate shortage of supply. However, it is my profound duty to make it clear to the world that losing emergency stock may become painful in the months to come," he said back in October.
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After all, everyone knows there’s only one organization that’s allowed to manipulate oil supply, and that’s OPEC. Oh, and now maybe BRICS, which is soon to have 6 of the top 10 largest oil producers in the world, making up about 40% of the world’s total oil supply
Not only did the Biden Administration not heed this warning, but they also seem to have little to no understanding about geopolitics or free market economics. If they did, they would see they are putting the country into a precarious position when it’s totally unnecessary. They continue to use the SPR as a short term solution to what is going to become a long-term problem.
The plundering shown above will do very little to the price of oil over the long term. Somewhere, OPEC is laughing. Here’s where draining the SPR has gotten us over the last year:
Meanwhile, using up the SPR does little to ensure energy security in potential times of war (we technically aren’t, but we’re fighting Ukraine’s war), natural disaster (read: Maui, etc.), or other significant crises (a massive developing Cold War and erosion of the petrodollar). As Zero Hedge noted last week, we are at the lowest levels of total crude inventories in America since 1985, including the Strategic Petroleum Reserve
Per Bloomberg, oil prices had been coiling for a few days ahead of data out last week and are “breaking out recently after OPEC reported that global oil markets face a supply shortfall of more than 3 million barrels a day next quarter - potentially the biggest deficit in more than a decade.”
“If realized, it could be the biggest inventory drawdown since at least 2007, according to a Bloomberg analysis of figures published by OPEC’s Vienna-based secretariat,” a report last week said.
OPEC’s 13 members have pumped an average of 27.4 million barrels a day so far this quarter, or roughly 1.8 million less than it believes consumers needed, according to the report.
And so, the problem is that no matter how many times Joe Biden taps the SPR, it’s fruitless, because OPEC calls all the shots.
OPEC (Organization of the Petroleum Exporting Countries) gets together and decides how much oil they're going to pump and sell on the market. By controlling the supply of oil, they can influence its price. If they produce less, scarcity kicks in and prices go up; if they produce more, there's a surplus and prices go down.
The situation is even more absurd given that the Biden administration is actively preventing U.S. companies from drilling for more oil.
Our reserves are a safety net for national emergencies, not a solution to $80 or $100 per barrel oil. And this is not a national emergency, but an “electability emergency” for President Biden. The disconnect between halting drilling leases and daily pump pain boils down to dollars and cents. Short-term gains in electability come at the expense of long-term national interests and you and I paying more at the pump.
Voters and consumers have two ways to think about the issue: one is the delusional take that the administration is actively doing its job and managing the issue by diving into our nation’s surplus at a time of need. The second is the double-whammy of a reality check that the administration is selling the country’s safety net out, putting us in a precarious position, and exacerbating price issues by stopping oil companies from bringing new supply online.
It’s literally an instance where the government is making the problem worse than it was to begin with. But once again we are reminded that the nation is unable to deal with even a slight moment of temporary discomfort when it comes to markets and prices. We continue to focus on short term fixes, not just with the strategic petroleum reserve, but with the stock market and the economy, meaning that the long-term prices (literally and figuratively) we will eventually pay will be that much more consequential.
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