As heard today on Sean Hannity's execrable radio program, Senator John F. Kerry (D-MA) believes that the role of the Strategic Petroleum Reserve is to be used as some sort of energy slush fund, tapped whenever the American consumer balks at fueling the sport-utility vehicle. Or at least, that's the implication I got from today's broadcast.
However, it doesn't appear that Kerry's on board with that notion, according to Hannity's own evening cable affiliate, the Fox News Channel. FNC says that, "[Democrats], like Kerry, urged increased pressure on the Organization of Petroleum Exporting Countries, which cut production in March and April, to boost its output to meet demand. Others called for tapping into the Strategic Petroleum Reserve, an idea Kerry has not backed."
My initial impression was to remark in a nasty tone that, "The reserve exists for the use of the DOD, not an SUV." I imagined that the SPR (and the similar Naval Petroleum Reserves) existed for, at the worst, the last-ditch use of the armed forces of the United States in a disaster scenario. An SPR/NPR establishment is a good idea, inasmuch as World War II clearly demonstrated the value of fuel in modern warfighting.1 Of course, I'd been irked when President Clinton ordered the release of petroleum from the SPR in order to ameliorate high gasoline prices back during the 1990s.
However, it seems that the President was right, and I was wrong. A quick visit to the Department of Energy's website taught me that the SPR was designed with a strong emphasis and focus upon oil as the facilitator of the American economy, not as some super fuel dump for the DOD. While the President could probably authorize release of fuel from the SPR to the DOD for warfighting or other military-related applications, such purpose does not appear to be the primary intent of the legislation as quoted in the site.
Therefore, it seems that the notion of tapping the reserve for fuel prices is, at least facially, a viable idea and the one envisioned by the drafters of the original llegislation. At this point, I suppose that the question is one of "do we need it", not "can we do it". Even so, I am not certain that the situation calls for a tapping of the reserve.
The economic problem, as I see it, is this: A growing economy depends upon transport of goods. The transport of goods requires fuel, and that's a fixed cost whose actual number will be variable on a regular basis. (Please excuse any sort of terminology errors. I'm not an economist.) If fuel prices go up, then the price increase will be passed along to the customer in order for the manufacturer to maintain or increase earnings.2 With increases in the the price of goods, people can't buy as much. As consumption of goods decreases, the economy falters and jobs are lost in order to match costs with declining revenues. Economic recovery no more, eh.
With regards to the Reserve, the President's decision to fill the reserves (salt caverns somewhere on the Gulf Coast) has been cited as a reason for the increase in fuel prices.
Thus, my problem:
An economic recovery rides on available fuel. Fuel's expensive right now. This can be addressed by, among other things, tapping the SPR. When the SPR is drawn down, it will have to be refilled. Filling it drives up the cost of fuel and then you're right back where you started.
'm not sure how to get out of it other than to grab Chevron/Texaco by the corporate lapels and tell them to get cracking on increasing production instead of cutting costs by eliminating refineries.3 I suppose the "supply-side" answer is to say that some other market force will intervene once the cost of fuel is driven down by an SPR release and then sustain economic growth such that the Reserve can be refilled and the economy sustained without problem.
Bringing this back to John Kerry (ever so tangentially) is this: Quite frankly, I don't care that people with SUVs are paying a lot of money. If they're stupid enough to buy an inefficient land barge with the approximate fuel economy (and none of the corresponding coolness of a Winston Cup stock car or the usefulness of an M1A2 Abrams) then let them pay a price. Inasmuch as it seems that a lot of social and economic liberals drive the things, let them suffer! Perhaps they'll learn a little about efficiency instead of trendy as their primary determiner of transportation choices.
On the other hand, those aforementioned liberals are less likely than good middle- or lower-class people to be vulnerable to economic disruption by rising costs and a stalled recovery. After all, do the ACLU or similar groups ever downsize? Conversely, higher prices for transportation of goods can affect jobs in manufacturing and other areas of the economy which operate subject to market forces.
There's the problem. I don't have a solution and I can only say this: "We must not've gone to Iraq for cheap oil, 'cause it sure ain't flowin' over here." I then usually follow that by saying, "Look, we own a country full of oil and I'm paying nearly two bucks at the pump?"
Enh.
19 MAY 2004 UPDATE: The Fox News Channel story is now linked, and the content is revised to reflect it.
1 The Germans had lots of Me 262 interceptors and high-quality tanks left idling because they didn't have the fuel (and the parts) to operate them. If your Pz VIE Tiger super tank doesn't have the fuel to maneuver, my M4 Sherman with a 75mm peashooter can easily run circles around you. The same could be said for the Japanese, period. If I understand history right, the flow of fuel to that country essentially stopped due to SUBPAC's actions, and that made Japan's bad situation even worse.
2 Norfolk Southern Railway president David R. Goode, among others, has complained about the rising cost of diesel fuel and thinks it's going to be a problem. The upshot of that is that the newest six-axle locomotives, the EMD SD70ACe and the GE Transportation Evolution are supposed to be more fuel-efficient than ever. (Aren't they always like that?) Norfolk Southern is testing the Evolution for purchase, which it designates the ES40DC. On the highways, several transportation companies (like UPS and so forth) are charging a fuel surcharge.
3 The immediate answer is drill in the Artic National Wildlife Reserve. For a number of reasons, I do not support such an initiative. I'm concerned about potential environmental disruption of course, but that's not one of the major objections I've got to the project. If our appetite for oil continues to grow, ANWR drilling would only be a temporary panacea. The analogy I thought of was that of a patient on the operating table who's hemorrhaging blood from a ruptured artery. Additional drilling is the equivalent of bringing in more units of blood; I'd prefer to hold down blood loss (i.e. oil consumption).
The long-term answer is alternative energy sources, but none of the leaders are plausible for a variety of reasons. Hydroelectric power requires water, and we're essentially out of major rivers to dam up and the American Southwest is going to need more and more water in the future. It may be that we'll have to reduce the number of dams in the West simply because the water's needed elsewhere. Solar power's the "safest" idea but you need huge amounts of land and the infrastructure's expensive. Wind turbines apparently don't work and cause lots of problems with birds, or something. Nuclear power plants are verboten thanks to the bloody Soviets and our little problem at Three Mile Island. That being said, I'd rather build reactors. If the French can do it, so can we.
Posted by Country Pundit at May 18, 2004 11:40 PM