The White House is joining a multination effort to ease world oil prices. For its part, the United States will release 1 million barrels of oil every day for the next 30 days. Another 27 other nations will, collectively, release the same amount. The immediate response from oil markets was a $5 per barrel drop in prices which, according to the Wall Street Journal, should translate into an additional 10 cent drop in the price of a gallon of gas.
That sort of math is above my pay grade, but I’ll assume that’s about right. What’s interesting (again, as the Journal notes) is that 1 million barrels a day is roughly what many experts think we could get out of the Arctic National Wildlife Refuge if we opened it up to oil development, and ANWR would last a far sight longer than 30 days. President Obama routinely dismisses ANWR’s oil reserves as irrelevant to our energy needs.
And he’s not alone. Apparently, oil produced here in America has little to no effect on prices, while oil from abroad has a profound effect. Here’s Senator Chuck Schumer a few years ago in a Senate floor speech:
If Saudi Arabia were to increase its production by 1 million barrels per day, that translates to a reduction of 20 percent to 25 percent in the world price of crude oil, and crude oil prices could fall by more than $25 dollar per barrel from its current level of $126 per barrel. In turn, that would lower the price of gasoline between 13 percent and 17 percent, or by more than 62 cents off the expected summer regular-grade price, offering much needed relief to struggling families.
But if we got the same amount of oil from Alaska, Schumer insisted it would “take ten years and reduce the price of oil by a penny.”
Now, it’s true that oil from Alaska is more expensive to get. But a million barrels of oil is a million barrels of oil. It’s a fungible commodity and, as we’ve seen in the last 24 hours, its price is set at the margin. But it’s not true that benefits would take 10 years to materialize. As Will Collier notes, when George W. Bush announced that he was lifting the ban on offshore oil drilling, the response from the press and liberals was entirely dismissive. Collier:
Bush’s order was, of course, immediately dismissed by the “experts.” Reuters waved away the action as “a largely symbolic move unlikely to have any short-term impact on high gasoline costs.” Barack Obama’s campaign lectured that if “offshore drilling would provide short-term relief at the pump or a long-term strategy for energy independence, it would be worthy of our consideration, regardless of the risks. But most experts, even within the Bush administration, concede it would do neither.”
The movement left was even more dismissive. ClimateProgress.org blasted The Washington Post for failing to headline their story about the order “Offshore Drilling Raises Oil Prices.” In response to Bush’s assertion that additional offshore extraction could equal current U.S. production in 10 years, they editorialized: “Yes, and monkeys could fly out of my butt” (emphasis in original).
But, Collier adds:
There was just one problem: reality. Even though, as critics were eager to point out, any additional American drilling was years in the future, oil prices immediately went into free-fall. By Friday, July 18, the price of a barrel of crude had dropped to $128.94, a 12% decrease. A month later, on August 14, the price had fallen to $115.05. In spectacular fashion, Bush’s academic and media critics were proven seriously wrong.
(As our own Steve Hayward notes, that’s hardly a new story).
President Obama’s decision to tap the Strategic Petroleum Reserve was probably not a reflection of any new or deep thinking about his energy policies. It’s simply a different way to add stimulus during a trying economic and (for him) political time. But perhaps the results of his decision might cause him to rethink his views on energy, both for the economy and his political predicament.