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Strategic Petroleum Reserve: Biden flunks Risk Management 101


Apr 13, 2024

As tensions arose between the U.S. and China after Joe Biden came to office, impacting upon supply chain woes for America, we were disturbed to learn how much the pharmaceutical industry relied on China, U.S. pharmaceutical companies scrambling for alternatives. Inexcusably, in a complete failure of risk management, our manufacturers failed to foresee the risk of putting all their eggs into a Chinese basket.

One would like to think our elected officials are mindful of Risk Management 101, especially when it comes to products having a national security impact – such as oil. When Biden became president, America was oil independent. However, influenced by a global warming mindset and a push to move us away from driving gas-powered vehicles, Biden turned off the domestic oil spigot to eliminate this self-sufficiency.

It is clear Biden and others in his administration did this with no concern over the consequences as reflected by the absence of an interim transition period in which we maintained our self-sufficiency until all electric vehicle (EV) issues had been resolved and electric power supply was capable of meeting demand. But, in cutting off our oil dependency, the problem here was one Biden alone created. With pharmaceuticals, China controlled supply so we were at its mercy. But Biden’s EV solution is what has now left us at the mercy of foreign oil manufacturers.

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Ironically, while we pump billions of dollars in military equipment into Ukraine to defeat a Russian invasion, Moscow is now able to increase pricing on the sale of its oil to the rest of the world, making up to $1 billion each day. But Russia is not the only major oil-producing country unfriendly to the U.S. that Biden has helped. He lifted sanctions on Iran thus also helping to finance Hamas, Hezbollah and other terrorist groups fighting Israel. While chess-masters have to be able to contemplate numerous moves in advance, Biden has difficulty contemplating a single one, effectively financing our enemies.

But it gets worse.

In the mid-1970s, with the price of oil hitting outrageously high prices, the U.S. decided to create the Strategic Petroleum Reserve (SPR), using massive salt caverns within the country to hold petroleum to be used in emergency situations. As of 2022, four different SPR sites existed, capable of holding 714 million barrels of oil. A maximum rate of 4.4 million barrels per day can be pumped out of the SPR for up to 90 days. Reduced withdrawal rates obviously allow that period to be expanded for as long as a year and a half. The current inventory of SPR storage is 49%.

When Donald Trump became president in 2017, the SPR contained 695 million barrels; when he departed four years later, it was at 638 million. Interestingly, before leaving office, Trump proposed buying 77 million barrels at a cost of $3 billion when oil prices had cratered. However, a Democratic-controlled Congress rejected it, ridiculously claiming it was a subsidy to the big oil companies. The Democrats’ position obviously was based on political gamesmanship rather than on our national security interests as both the low pricing and the fact it would allow us to top off the SPR made it nonsensical to reject the proposal. It was a blatant case of prioritizing politics over national security.

The SPR was within 13% of its highest-ever level when Biden became president – and then began draining it. He has succeeded in reducing the SPR to its lowest level since 1984, not even making an effort to fill it before cutting off our oil independence – an act of total irresponsible risk management. The SPR is supposed to be reserved for emergencies only; however, Biden’s releases have been purely politically motivated to reduce rising gas prices. When Trump proposed buying oil in 2020 to fill the SPR, it was priced at $24 a barrel; oil prices today are $86 per barrel.

While Biden recently indicated his intent to replenish the SPR, almost as quickly as he made that announcement, he reversed himself and now will not refill it. In a candid observation by Daniel Turner, the executive director for Power The Future – an energy advocacy organization – he stated, “It’s pure insanity to watch the Biden administration cut American oil production and then claim they can’t refill our critical reserve because of the price.” And, as 40-year veteran of the oil and gas industry and now energy consultant David Blackman warns, “Killing a major industry in the U.S. takes time. Giving Biden a second term will give his regulators the ability to inflict far more damage than they already have done.”

As Biden’s oil policy has only benefited our enemies, he might consider heeding the philosophy of another. North Korea long ago adopted a political philosophy known as “juche” – meaning “self reliance” and “independence.” This remains just a dream for Pyongyang due to its limited natural resources. Meanwhile, Biden denies us the juche reality we once enjoyed of oil independence, imposing economic burdens upon us with his irresponsible oil policy. He could learn something from North Korea’s philosophy.

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