With oil priced at just two-thirds of its highs set three years ago, President Barack Obama launched yet another spend-now-pay-later program. But this time, the President has done it with something much harder to replenish than fiat dollars. He is spilling out the nation’s emergency crude oil reserves.
A year after Obama began limiting domestic petroleum exploration, he has begun siphoning off America’s last energy bulwark — the U.S. Strategic Petroleum Reserve (SPR). Thirty million* barrels of oil have already been frittered away by Obama, yet oil prices are now higher and supplies are tighter than they were before these precious emergency reserves were drained away.
Obama’s actions are so blatant that I refuse to give him the benefit of the doubt. Not only is the price of crude far lower than it was in the summer of 2008, but there is no physical shortage. Just the opposite; oil inventories in June were close to historic highs. There can be no doubt, however, that they will decline. The President has choked off domestic offshore oil exploration and has refused to open up potential petroleum-rich regions like Alaska for onshore exploration.
Does the President really believe we are in a crisis now? Or does he want to make things worse by throwing away our last line of defense, the SPR?
Last week, Congressional leaders grilled Federal Reserve Chairman Ben Bernanke as to why Americans are facing rising prices even in the face of a stagnant economy. Crude oil is traded in U.S. dollars, meaning that petroleum exporters like OPEC are insisting on higher well-head prices for finite amounts of oil in a world where Washington is able to create an infinite amount of dollars. It all translates to higher prices at the pump — if not this summer, then certainly by the end of the year.
Worldwide oil supplies are not keeping pace with global demand. Emerging markets’ demand for oil is rising, while mature fields in Russia, the North Sea and Mexico start to wind down.
Congressman Bill Cassidy (R-La.) along with 26 other lawmakers, signed a letter to the President on the drawdown of the SPR. They openly question why the Administration tapped the SPR without adopting a national energy policy that will lessen America’s dependence on foreign oil. The letter begs the question: Why not develop America’s energy resources and remove regulations on drilling in the Gulf of Mexico?
The letter from those members of Congress states:
It’s time to adopt a national energy policy which develops America’s natural resources, creates jobs and lessens our dependence on foreign oil. By tapping the Strategic Petroleum Reserve, the administration acknowledged that rising gasoline costs and increased dependence on foreign oil are unacceptable. Yet, the Department of the Interior continues to delay the issuance of new permits for offshore drilling in the Gulf of Mexico.
The current energy policies damage not only Louisiana’s economy but also exacerbate America’s energy problems. The president has often expressed interest in alternative energy. These polices can be pursued without ignoring domestic energy resources and the associated good paying jobs.
Is Obama acting out of stupidity or is something more sinister going on? That’s a reasonable question, considering that the President is driving America toward an energy maelstrom.
Obama apologists argue that the President simply doesn’t know better, that he and his team of energy advisers really do believe that the draining off of America’s emergency energy reserves makes sense so that the country can afford one last summer’s trip to Nantucket.
I don’t buy that Obama is stupid, not for one second. Say what you will about the President, but he is intelligent, probably too much so for the country’s own good. Obama is a graduate of Columbia University and Harvard Law School. Ivy League universities don’t graduate dummies. I have had two friends who graduated from Yale. Both are remarkably smart.
So what does that leave us with? I believe we have a President who is pressing forward an energy policy that will backstop Saudi Arabia at any cost.
Because of the Bush family’s close relationship with the Saudi royal family, Bandar bin Sultan bin Abdul-Aziz, Saudi Arabia’s ambassador to the United States from 1983 to 2005, was nicknamed Bandar Bush.
And while each President since Richard Nixon has supported the House of Saud, no President before Obama has bowed so diligently and committed so much to Saudi Arabia. It seems the Saudi Kingdom dictates policy to Obama rather than the other way around.
Two years ago, another Saudi former ambassador to the United States, Turki al-Faisal, wrote an essay for Foreign Policy badgering “misguided” U.S. politicians who promote American energy independence from the Kingdom. According to the former ambassador, it is “political posturing at its worst.”
I am offended that our President would take such lectures on decency from a tribal prince living in a brutal Muslim regime.
PhillyBurbs.com had the same conclusion on July 11.
It’s not just that Obama has presided over the near-end or slow crawl of new domestic drilling. The administration has been dragging its feet on approving a game-changing new pipeline (from Canada) that would, according to a December 2010 study commissioned by the Obama administration itself, effectively eliminate our dependence on oil from Saudi Arabia…
Our dependence on, in many cases, anti-American oil — Saudi oil, Nigerian oil, Venezuelan oil and the rest — will continue to rise, transferring our remaining wealth to the stand-out Shariah states, kleptocracies [SIC] and Marxist states of the world, further entrenching that ‘oasis of interdependence and cooperation’ Saudi royals talk about. It’s the Saudi dream come true. But it’s an American nightmare.
I can’t speculate as to why the President of the United States is selling out the nation to appease Muslim oil exporters. I believe Obama’s energy policies are inconsistent with those of a President working for America’s best long-term interests.
Action to take: Obama’s policies are leading to a depreciating dollar and higher oil prices. My expectation is that within the next 18 months, crude will surpass $150 per barrel. I urge you to buy blue chip North American petroleum stocks. Suncor Energy, one of Canada’s leading oil sands producers (SU, NYSE, $39.50), remains one of my favorite picks.
In the end, all of Obama’s horses and all of Obama’s men won’t be able to put the House of Saud back together again.
Yours in good times and bad,
Myers’ Energy & Gold Report
*Update: The original post had billion. Million is correct.