There they go again. The Bush administration's last gasp bonanza for the oil industry. Secretary Bodman and his minions at the Department of Energy could not have even waited the 19 days for the Obama administration to take office in order to permit them to deal with this issue from their perspective.
Barely an opportunity has gone by for this administration not to further enrich the oil industry, or to keep a free market in oil from functioning when there is downward pressure on the price of oil. With its price cascading downwards from $147 a barrel in July to $35/bbl by Christmas, leave it to this administration and its newly recruited ally, Rep. Edward Markey, Chairman of the Select Committee on Energy and Global Warming, to do whatever was in their power to halt the slide in oil prices.
On December 26 the price of oil (WTI) ended the day as quoted on the NYMerc at $37.58/bbl. The Department of Energy was prohibited by law from adding to the SPR through the end of December 2008. With the statutory moratorium coming to an end it became clear that the DOE was ready to gear up purchases once more by preparing to reinstitute purchases to the Strategic Petroleum Reserve. Just the whisper of the DOE's planned action started to move prices. And then, to cover themselves they obtained a blessing from none other than Ed Markey Congressman from Massachusetts who had been a vocal critic of the DOE's policies in the past, and early last year was moved to comment "Many hard working families and individuals here in Boston and across America are spending as much as 10 percent of their total income on gasoline, while the big oil companies... are earning billions while fuel prices are wrecking havoc throughout the country." That was then, yet the now, spurred on by either a sad misreading of the dynamics of the oil market or a highly successful campaign by the overly powerful oil lobby, flies in the face of what was once his clearly expressed outrage at unconscionable oil and product prices, and support for cogent oil policies, taking all the nation's citizens into consideration.
In any case, the day after Markey's very public support (December 30, 2008) of the DOE's planned actions to reactivate SPR purchases, the price of oil jumped by more than $5.00 a barrel (if your counting, that's more than $100 million out of American consumers pockets each day, and day after day). And of course Bingo!, the first business day of the New Year, the first day they were able to do so, once again the Department of Energy made it official, they trumpeted they were going to issue solicitations to purchase oil for the SPR.
And what did that do for the price of oil that until then was on the ropes and flailing badly? Well, between Markey and the DOE's SPR initiative, by close of business on January 2nd the price of oil had its biggest weekly gain since 1986, to $46.34/bbl. And this with some 40 VLCC (very large crude carriers) carrying up to 2,000,000 barrels each, anchored off various ports holding well over 50 million barrels of oil at sea alone. The reason oil is being held in tankers at sea is because there is virtually no independent land storage available. The world is awash in oil. That without the SPR lifeline, the price of oil was primed to cascade ever lower (please remember the price of oil was about $22/bbl when President Bush took office). Yes, there is the issue of Gaza (this all transpired before the land incursion) and the Russian-Ukraine gas imbroglio, but to those dealing with oil on a day to day basis, these were no more pertinent than the forever oil price frights so prevalent and so masterfully orchestrated by the industry's flacks and a hyper press. And certainly not, given all the other exigencies over that period, worthy of the largest weekly jump in prices since 1986!
In essence the SPR, rather than being our oil safety valve, has become a welfare program for the oil industry and one of the nation's most outrageous boondoggles. The last time the SPR was invoked it cost us enormously. In January 2007 President Bush, during his State of the Union Address, announced the doubling of the Strategic Petroleum Reserve. At that moment the price of oil was crumbling, having touched under $50 just a few days before. Bush's announcement gave heart to the oil patch, their friends at OPEC, the oil price speculators, and everyone and anyone who would benefit from higher oil prices. Invoking the doubling of the SPR was the signal that set off the greatest price escalation in oil's commercial history. Barely 18 months later we were to experience $147/bbl, a level that was never dreamed of even in the wildest and most seductive visions of a desert mirage. And stubbornly the DOE continued to fill the SPR irrespective of price and the psychological impulse it sent to the markets (i.e. the US government buying at these prices was tantamount to extending its blessing). It literally took an act of Congress to override the administration in order to get them stop making purchases as from May 2008. Other than releasing small amounts of oil from the Reserve for very limited short term climatic or pipeline disruptions, extortionist high oil prices that were risking a national economic calamity were never adequate cause to tap the SPR in this administration's reckoning. The oil barons would not have been pleased.
It is a scandal, with the nation hurting in so may areas, we are once again dedicating federal funds to the one industry that has benefited shamelessly under the Bush administration. It is past time that the Bush administration and its welfare policies for the oil industry come to an end. It's time to send the hacks at the Department of Energy packing!
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