Op-ed: Beware of Energy Isolationism
July 13, 2022
Many have undoubtedly seen the headlines of crude oil from the Strategic Petroleum Reserve (SPR) being sold overseas, including to China’s Sinopec, a state-owned oil company and a U.S. strategic competitor. Americans are right to be alarmed by such transactions at a time when the price at the pump is skyrocketing. However, the real issues warranting our attention are the Biden Administration’s war on fossil fuels, mismanagement of the SPR, and the diminishing U.S. refining capacity.
Oil, being a global commodity, means that U.S. export activity is well within market norms. After all, oil is traded globally and pegged to a variety of interdependent benchmarks, including West Texas Intermediate (WTI) and Brent, among others. Simply put, alleviating supply-side pressures in India, Southeast Asia, or Europe carry positive implications for the United States by increasing overall oil market liquidity. It’s a prime reason why in 2015 we repealed a statutory crude oil export ban.
It is also important to note that the U.S. is a net exporter of oil. In 2021, for instance, the United States imported some 8.47 million barrels per day (mb/d) and exported some 8.63 mb/d. This is a balance formed out of market trends, wherein U.S. refining capacity is largely geared to receive heavier oils, which the U.S. produces in relatively small quantities compared to the lighter oils that have become so plentiful following the shale revolution.
However, the Biden Administration has repeatedly demonstrated its favor toward patchwork fixes to energy crises, and the SPR releases have become a cornerstone of this policy. Beginning in November 2021, the administration announced a release of 50 million barrels from the SPR to address rising oil and gas prices—notably prior to Russia’s invasion of Ukraine.
When this didn’t work, the Biden Administration announced two additional releases, including the largest ever such “emergency” release in U.S. history—1 mb/d for 180 days. In total, the administration has announced the release of 260 million barrels. Yet prices continue to rise, oil stands above $100 per barrel, and gasoline reached a historical national average of $5.00 per gallon.
Sam Buchan is the Director of the Center for Energy and Environment at AFPI.
Read the full op-ed on Real Clear Energy.
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