On November 23, 2021, as the price for West Texas Intermediate (WTI) crude hit $78.50 per barrel, U.S. President Joe Biden issued an order to the U.S. Department of Energy (DOE) to release 50 million barrels of oil from America’s Strategic Petroleum Reserve (SPR). Concerned about his declining public approval ratings and the impact that high gasoline prices were having on them, Biden and his advisors felt a political need to “do something” to address the situation, always the most dangerous motivation for any political regime.
As I noted at the time, markets immediately responded to the Biden order by running oil prices up, not down, because they understood that the amount of oil involved was just a nominal gesture, a drop in a vast ocean of a 100 million barrel-per-day market. The oil price did start to drop the day after Thanksgiving, but that was due to the outbreak of the Omicron variant and fears of its potential to destroy oil demand, not related to Biden’s release.
Those fears having now been largely erased in the market’s collective hive mind, WTI traded at over $82 per barrel on Thursday, and some analysts are now projecting that $100 oil is just around the corner. Memories of the administration’s SPR release are mostly out of mind, returning briefly only whenever DOE finally gets around to releasing a new tranche of a few million barrels to one of the larger U.S. refining companies for processing. On Thursday, Valero, ExxonMobil
, Marathon and Phillips 66
were among the bidders for a total of 18 million barrels offered by DOE in its first organized sale under the Biden order.
Or was it? Not really. Most, if not all of those barrels can in fact be attributed to previous acts by congress to sell 30 million barrels out of the SPR during fiscal years 2022-2025 as pay-fors in the 2018 bipartisan Budget Act. The market, meanwhile, barely blinked. Why would it?
All of this lack of real consequence coming about from such a high-profile presidential action provides just one more example of what little real power any U.S. administration has to actively intervene in a meaningful effort to impact oil prices set on a massive, global market. Things just do not work this way, and you really must wonder why Mr. Biden still, after all his decades in Washington, DC, does not recognize that?
After all, Biden was already a veteran in the Senate as he watched then-Presidents Gerald Ford and Jimmy Carter flail about during the 1970s, outlawing crude oil exports, implementing various regimes aimed at price controls, passing a Fuel Use Act that forced the building of hundreds of new heavy-polluting coal-fired power plants across the country because they were sure we were running out of natural gas. On and on the brain-dead interventionist energy policy choices went. No bad idea seemed too awful for consideration, and it all culminated in 1980 with the passage by a Senate in which Biden held a seat of the Windfall Profit Tax, the single most brain-dead policy choice of them all.
Despite all of his long history with utterly-failed energy policies – most of which he supported, of course – Biden thought it a great idea in November to trudge down that road to inevitable failure one more time. Will this latest failure be the turning point, the time at which he and his advisors finally come to understand that the government of the United States cannot control the price for oil on an open, global market?
Please. Don’t be silly.