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Wednesday, August 6, 2008

Why Releasing the Strategic Oil Reserve is So Dangerous

As part of my plan to significantly reduce the price of oil, I was in favor of releasing a significant part of the strategic petroleum reserve. As such, I am not completely opposed to such an idea, however I firmly believe that any move to release the strategic oil reserve has to be part of an overall multi layered plan to reduce the price of oil. Releasing the strategic oil reserve carries with it all sorts of risks and thus it shouldn't be used unless you are certain that it will be part of something that will dramatically effect oil prices.

In Barack Obama's plan, he wants to release about ten percent of the strategic oil reserve. The problem is that there is little substantively in his plan that will immediately reduce the price of oil besides releasing the strategic oil reserve. The real problem is that oil is controlled by all sorts of folks that are shall we say loose cannons.

If Obama releases the strategic oil reserve, the Iranians might see this as an opportunity. They may attempt a scorched earth policy, and reply by cutting off all drilling in their country indefinitely. If they did that, not only would the price of oil go up, but we would also then be vulnerable to shortages with a depleted strategic oil reserve. Obama wants to release about one tenth of the strategic oil reserve. Remember this is there for emergencies only. High gas prices is not necessarily an emergency.

By releasing it though, he may create one. Iran could easily take this is a provocative move. They are loose cannons. We can't predict how they will respond to anything. The Iranians may not care what they do to their own economy and people and see an opportunity to crush America. The oil reserves would be released, prices would go up, and we would have shortages in the reserve at exactly the time when there is an emergency.

If anyone releases any part of the strategic oil reserve, they had better have a very good reason. To me, simply releasing it on its own to drop prices is not nearly a good enough reason. I hope Barack Obama thinks long and hard about these potential consequences before ever actually releasing any part of the reserve for it could create a wrath he doesn't expect.

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