It is with incredible equanimity that the media has digested the announcement of a 5 million barrel ‘test’ release from the Strategic Petroleum Reserve on Wednesday, but the market certainly hasn’t – WTI crude plummeted $2.30 on the news.
It doesn’t take much analysis, however, to see that this is a weak attempt to flex some muscle to use the US energy boom as a wedge against Russian energy influence in Ukraine and the rest of Eastern Europe.
This ridiculous meme has gained traction in the last week and a half from mostly GOP leaders in Washington, suggesting that the United States ‘drill everywhere’ and begin exporting natural gas into Europe – a silly idea I’ve debunked several times this week in columns and on air – but now this fantasy has gotten support from real policy in the White House in this latest SPR release.
To put this in context, the last SPR release was in 2011 in response to a coordinated support of rebels in Libya, offsetting the 1 million barrels a day of lost Libyan supply caused by the war. Before that, the SPR was used in the aftermath of hurricane Katrina and before that, during Desert Storm in 1991. The pattern is clear: the strategic petroleum reserve was designed to be used in the national interest in moments of extreme market stress – which is why this release is being falsely called a ‘test’ by the DOE.