After gasoline prices started soaring last year, President Joe Biden called for the release of millions of barrels of oil from the Strategic Petroleum Reserve (SPR) as a way to ease Americans’ pain at the pump.
Some months later, the House Oversight and Accountability Subcommittee on Economic Growth, Energy Policy, and Regulatory Affairs is debating whether that move was the best decision. The subcommittee held a “Burning the Midnight Oil: Why Depleting the Strategic Petroleum Reserve is Not a Solution to America’s Energy Problem, Part I” hearing Wednesday.
At issue was a debate over the primary purpose for the SPR, which is to protect the country against oil shortages.
“Any storage capability is an extremely valuable asset,” Ilia Bouchouev, managing partner at Pentathlon Investments, said in describing the quandary. “Storage literally buys time. It allows supplies to be shifted from times of relative abundance to times of scarcity. The problem of optimal storage decisions goes back to the very beginnings of human civilization. It is a very difficult problem, as the decision today depends on what might happen tomorrow, which, of course, we don’t know with certainty.”
Although the price of oil was high, boosted in part by Russia’s invasion of Ukraine but also by Biden’s domestic policies against fossil fuels, there was no national emergency, thus casting a shadow on the decision, Bouchouev said, and that was the crux of the debate Wednesday. Democrats applauded Biden’s swift action, saying it helped Americans who were struggling with the high prices. Republicans called it a political ploy to accelerate a price decline and possibly influence the ballot box.
The three people who testified were on different points of the spectrum about the cost-benefit analysis of the move and the hearing was sometimes contentious as members of the panel challenged the witnesses who held opposing views.
It basically boiled down to a question of whether the war in Ukraine created a sufficient national emergency that would justify depleting the SPR, a message subcommittee member Rep. Scott Perry (R-PA) touched on.
Permission to sell oil from the SPR can only be granted by the U.S. President, according to the Independent Petroleum Association of America (IPAA). In November 2021, the IPAA described the SPR as "an important national security tool to combat disruptions in the oil market" and condemned using the reserves to offset high gas prices. The IPAA called on policy makers to "oppose all non-emergency sales of oil.”
Since the SPR was created, small-scale withdrawals have previously been ordered, notably during one of the wars in the Mideast and after Hurricane Katrina. No previous release, however, has been on the scale of Biden’s. As of Feb. 24, there were 371.58 million barrels of oil in the Strategic Petroleum Reserve (SPR), representing a decrease of more than 36% from one year ago, according to Ycharts.
Indeed, the 227 million barrels he released was about 10 times higher than the largest of other past releases, said Rep. Fallon (R-TX), who chairs the subcommittee. That included a release in October, one month ahead of the election. At that time, national security advisor Jake Sullivan and NEC director Brian Deese said in a statement that the Biden administration would continue to release oil from the SPR in an effort to drive down gas prices.
"At the president’s direction, the Department of Energy will deliver another 10 million barrels from the Strategic Petroleum Reserve to the market next month, continuing the historic releases the president ordered in March,” the statement said.
Alex Epstein, president of the Center for Industrial Progress who was criticized for past writings that were called white supremacist – which he said later were designed to elevate western democratic societies above regimes elsewhere, as opposed to being racist within America – called the depletion of reserves disastrous.
“The Biden administration is abusing the SPR and, as a result, threatening our oil security,” Epstein said in his testimony.
Epstein also talked about how Biden’s energy policy is hamstringing the country's energy position. In California, where he lives, he talked about the push for electric vehicles but then the plea to not charge them because the electrical grid was so precarious at the time.
The third witness was Demond Drummer, managing director of Equitable Economy, who touted the benefits of increasing our reliance on renewable energy. Much of his testimony was based on the premise that “we can’t drill our way out of” being at the mercy of global big oil, a view that resonated with some Democratic panelists.
An ancillary aspect of the debate was whether the release lowered prices or whether prices eased as a result of normal spikes and lows in market activity, a matter that was never explicitly resolved, just argued.
The two-hour hearing sometimes devolved into partisan arguments among the panelists, and between the panelists and witnesses, taking away from the ability to focus on finding answers.
The House Oversight and Accountability Subcommittee on Economic Growth, Energy Policy, and Regulatory Affairs is comprised of nine Republican and seven Democratic members. It has its work cut out for it, with Fallon listing a slew of challenges it has to take into consideration in the coming years.
