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: more...

Posted by: Country Pundit at 11:40 PM | No Comments | Add Comment
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