Pumping Pain

Ah, Labor Day; a time when many Americans get a long weekend off from work and an opportunity to spend time with the family and go on a road trip. Inconveniently enough, gasoline prices have sharply spiked recently, causing this Labor Day weekend to have the highest national average price for a gallon of gas ever – $3.83 a gallon. The price spike is the result of a witch’s brew of calamities: Increased tensions in the Middle East (you’d think the market would be used to it by now…), a massive explosion at oil giant Venezuela’s largest refinery, a severe fire at a Chevron refinery in California, and Hurricane Isaac, which has briefly frozen almost all oil production in the Gulf of Mexico. High gas prices always hurt middle-income Americans, but they are especially painful in a time when so many people plan to be out on the road. Hoping to capitalize on the consistently high gas prices that have been seen under the Obama Administration, many speakers at the Republican National Convention this week addressed the issue and how it is putting additional stress on the budgets of many families. One particularly scathing criticism of the president’s domestic energy policy came from Democrat (and formerly ardent Obama ’08 supporter)-turned-Republican Artur Davis. Davis, referencing then-candidate Obama’s Democratic nomination victory speech, skewered that “the moment when the rise of the oceans began to slow and our planet began to heal” really just meant “middle America, get ready to shell out 60 bucks to fill up your car.” Certainly quite funny and something that surely resonates with voters that are simply sick of gas over $3, but with respect to this specific price spike, the president definitely deserves a pass – the recent price spike is due to events that are completely out of his control.

However, Obama’s response to the matter is condemnable. The president is considering playing what he thinks is the Get Out of Jail Free card of domestic energy: Tapping into the Strategic Petroleum Reserve (SPR) to increase the market’s supply of oil, thereby leading to decreased gasoline prices. According to the Department of Energy, the SPR is designed to serve as the federal government’s “response option should a disruption in commercial oil supplies threaten the U.S. economy.” Now while higher-than-normal gas prices are undesirable during such tough economic times as these, these are certainly not circumstances that warrant a release of SPR oil. An SPR release has only occurred three times: During Operation Desert Storm when Middle Eastern oilfields were a fiery nightmare, after Hurricane Katrina wrecked the Gulf oil industry, and during the Libyan civil war (Libya is a major oil-producing nation). These were times when the national and global oil markets were genuinely threatened and so such action was commendable, but the current prices are due to fear and not a true shortage (in other words, there is still plenty of oil to go around). It is understandable (and in sentiment, praiseworthy) that the president might want to do something to help out Americans who are struggling to cough up extra to fill their cars, but this is an election year entering its final two months and so any SPR release would undeniably be a political move. The Republicans are hitting Obama hard on his energy policies, policies they claim have led to higher prices for gas and electricity. Therefore, Obama has a perverse incentive to authorize an SPR release in order to reduce gas prices and maybe give the consumer economy a fleeting shot in the arm solely to improve his image for reelection. Frankly, the SPR is for emergencies, not for political pandering, and not for market micromanagement. The oil industry should not have the executive office breathing down its neck, ready to release (or even to consider to release) a round of oil out of the SPR due to an uptick in gas prices – it’s called a free market for a reason and a government-sanctioned sale of SPR oil into the market would drive down the price private companies (aka the American job creators) are getting for the crude they drilled. Does $3.83 for a gallon of regular unleaded “threaten the U.S. economy” in the way Katrina or international wars did? Absolutely not. But due to inappropriate blaming or not, does the president know that it threatens his reelection chances? You bet.