Created in 1975, the United States Strategic Petroleum Reserve was originally intended as an emergency national security tool to manage oil-supply disruptions. Emergency drawdowns from the reserve have been historically limited to actual crises that threaten the nation’s energy access, such as the one that Hurricane Katrina caused in 2005. The Biden administration, however, has been using the SPR to respond to political emergencies and engage in central planning. White House senior advisor John Podesta suggested earlier this month, for example, that the administration might sell oil from the SPR to bring down gas prices.

The “Bidenomics” policy of heavy government intervention in the economy has upended the SPR’s traditional role. The administration first drew down 50 million barrels in November 2021—the largest emergency sale in history at the time—and presented it as an attempt to reduce domestic gas prices. Energy prices subsequently rose in early 2022, responding to Russia’s invasion of Ukraine. But critically, the price increases were the result of potential future disruptions to oil supply, not an actual disruption. Nevertheless, the administration once again broke the record for the largest ever SPR release: 180 million barrels over the course of six months.

Predictably, selling oil when prices were elevated due to worries about the war in Ukraine created the appearance of a windfall for taxpayers. Subsequently, the Department of Energy unveiled a new authority to announce its intent to purchase oil at lower, fixed prices in the future. The administration sought to use this tool to manage prices and encourage investment by assuring producers of future demand at lower prices, which they could in turn use to justify underwriting investments in the present. 

These central-planning techniques resemble the Biden administration’s efforts to deploy green industrial policy to drive future growth. Indeed, just before joining the administration as deputy national security advisor, Daleep Singh argued that the SPR should be expanded to manage prices across a range of commodities, in particular to support the “green transition.” Singh’s proposal would allow the Department of Energy to wield various tools familiar to Wall Street, such as selling put options, to manipulate prices—and, through prices, supply itself.

Speculating on oil prices and in other commodity markets is an inappropriate use of government power that is likely to end up costing taxpayers dearly. Predictably, the recent rise in oil prices has caused the Biden administration to defer refilling the SPR, creating a strategic vulnerability for the United States and raising the possibility that a taxpayer windfall may never materialize.

Congress should put a stop to this highly activist approach. Key national security resources like the Strategic Petroleum Reserve should not be used to manage commodity prices. Congress should limit use of the reserve to drawdowns in the event of real and significant supply disruptions. Instead of relying on central-planning techniques to try to engineer adequate commodity supplies, the United States should reduce barriers to production like permitting and other government regulations—a strategy that would empower the American energy sector to meet the market's needs.

Photo by Brandon Bell/Getty Images


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