Tony Blankley / June 29, 2011

When It Comes to Oil, Where’s the Beef?

It is said that there are no atheists in foxholes. In that context, the recent rise in oil prices seems to have turned the Obama administration into true believers (at least rhetorically) when it comes to the best method to keep gas prices down and the American economy growing.

With oil at more than $100 a barrel, the White House announced last week that it was going to increase oil supply by withdrawing 30 million barrels a month from our strategic oil reserves and put that oil into the world market.

It is said that there are no atheists in foxholes. In that context, the recent rise in oil prices seems to have turned the Obama administration into true believers (at least rhetorically) when it comes to the best method to keep gas prices down and the American economy growing.

With oil at more than $100 a barrel, the White House announced last week that it was going to increase oil supply by withdrawing 30 million barrels a month from our strategic oil reserves and put that oil into the world market.

As Treasury Secretary Timothy Geithner usefully explained last week, according to Reuters, “costlier energy and less vigorous worldwide growth would keep U.S. economic growth to around a 2 percent annual rate in the first half this year.” Geithner said, “Reserves exist to help mitigate those kinds of disruptions,” and Reuters paraphrased him as saying that “putting additional oil supplies on market was ‘sensible policy’ that should give a lift to a slowly expanding economy.”

This has not been the analysis the Obama administration, until now, has brought to the issue. Over the past few years, the administration has argued that gas is too cheap. The president’s secretary of energy has said that “somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” When gas went up to $4 a gallon, the president was asked on CNBC whether $4-a-gallon gas prices were good for the American economy. The president replied, “I think that I would have preferred a gradual adjustment.” In other words, he wants the price of gasoline in America to go higher but he would prefer that it go up gradually (presumably so that the new grim reality could sneak up on the public slowly and with little attention paid to the steady increase). One has to commend the president for that remarkably frank statement.

Certainly, the administration’s ban and delays on offshore and new Alaska drilling, the opposition to letting American oil companies develop and rapidly bring on line the vast supply of newly found shale oil and shale natural gas, the Environmental Protection Agency’s effort to force many of America’s coal-firing utilities out of business and the proposed special tax increases on American oil companies are consistent with the administration’s aforequoted policy of restricting energy production in order to raise the cost of energy to Americans. (Full disclosure: As I have stated in previous columns, believing as I do in free markets and high levels of energy production for America, I give professional, compensated advice to American energy-producing corporations.)

Of course, the rhetorical surrender to rationality that Geithner offered up last week – that a larger available supply of oil will lower gas prices and invigorate the economy – was only gained under the duress of a tanking economy and an upcoming presidential election.

And importantly, the policy surrender was limited. The only method of increasing oil supply the administration is willing to endorse is the tapping of the Strategic Petroleum Reserve. Of course, that is oil that already has been discovered, extracted and placed in domes in our Gulf states. This policy does not add even a single gallon of new oil to our reserves. In fact, it reduces our reserves by consuming them now rather than saving them for a supply emergency (such as a boycott of the Organization of Petroleum Exporting Countries, a war in the Middle East that cuts off supply or a natural disaster like Katrina that cuts off supply. That is the reason we have strategic reserves of both oil and certain critical minerals – to protect from sudden cutoffs, not to manipulate prices.) Tapping the Strategic Petroleum Reserve is the equivalent of trying to increase the supply of American meat by going into Safeway and shooting a package of steaks. If one really wants to increase the supply of meat, he should go into the woods and shoot some meat that is still on the hoof. Or raise a new herd.

And if the administration really wanted to increase the supply of oil over the long term to bring down the price of gas and expand our economy, it would permit our “energy hunters” in the private sector to develop and bring on line the vast oil and natural gas reserves with which America has been blessed.

Still, this is at least theoretical progress. Just as the president admitted last December – when he capitulated to Republicans and agreed to extend the Bush tax cuts because tax cutting is good for an expanding economy (a point he seemingly has forgotten, as now he is calling for higher taxes) – now he has admitted that increasing oil supply brings down gas prices and raises the economy.

Just as we are all believers when in foxholes during wars, apparently we are all supply-siders when in $4-a-gallon hard times before elections.

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