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U.S. Energy Policy Is All Smoke And Mirrors

With the price of crude oil now well above $100, how has the U.S. government responded? Well, last week Congress voted to halt the shipment of 70,000 barrels that were being sent on a daily basis to our emergency reserve of crude oil known as the Strategic Petroleum Reserve, or SPR. Never mind that this number represents only 0.3% of the 20 million barrels consumed by Americans each and every day, and might only shave 4 to 5 cents off a gallon of gasoline according to the U.S. Energy Information Administration.

And this week? Have you ever heard anyone tell you to stick with what you’re good at? Well, of the 435 members of the U.S. House of Representatives, 158 come from the legal profession, or more than one-third of the legislative body. So, it’s not surprising that in a day where crude oil surpassed the $129 a barrel mark in trading, Congress decided to sue the Organization of Petroleum Exporting Countries. OPEC, which produces 40% of the world’s oil, is comprised of Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, Qatar, the United Arab Emirates, and Venezuela. And we wonder why the rest of the world loves us so? According to the Associated Press today, the U.S. House of Representatives voted to let the U.S. Department of Justice pursue energy antitrust and price fixing cases against members of the OPEC oil “cartel.” The bill, which was approved 324 to 84, would create a special Justice Department task force to investigate energy markets to root out manipulation and unwarranted speculation. Democratic House speaker Nancy Pelosi was quoted by the Agence France-Presse as saying:

The House today with a strong bipartisan and veto-proof margin voted to hold foreign oil cartels and Big Oil accountable… Instead of using a veto threat to shield cartels and Big Oil companies from accountability, the Bush Administration should work with the Congress to protect American consumers.

However, AP reporter H. Josef Hebert noted this afternoon:

Many energy experts and legal scholars doubt that such an enforcement action would be successful.

Earlier today Bob Tippee, editor of Oil & Gas Journal, told News Radio 590 KLBJ in Austin, Texas, that:

It will work against, rather than for the interest of oil consumers. It’s a wrong move. I think it’s more of the silly policy-making we see in Washington D.C. these days…

It shows a gross misunderstanding of the oil market and OPEC’s role in it. It sets up a false dragon display. The supposition is that OPEC is producing far less than it could be producing, and that is blatantly false.

Short of calling this legislative body a “House Of Fools,” it appears this is yet another display of “smoke and mirrors” by Capitol Hill politicians. As with the SPR situation, the U.S. House of Representatives is only making it appear like they are doing something to deal with the energy crisis of 2008. The sad thing is, a number of Americans will probably buy into the farce. Earlier today on CNBC, legendary oil investor T. Boone Pickens, Jr., had this to say about Washington and our energy “policy”:

You’re talking about reducing taxes on gasoline for the summer? Is that an energy plan? Hell no, it’s not an energy plan. It’s no plan at all. And, you know, it’s just amazing to me what politicians focus on. They ought to step back and look at the $600 billion a year that it’s costing this country to buy oil…

Well, I still say politicians, I mean, what they think about, is getting re-elected, or getting elected, one or the other. They’re not thinking about how to solve the problems for energy in America.

Sources:

“House action targets OPEC”
H. Josef Hebert
Associated Press, May 20, 2008

“US House passes anti-OPEC bill”
Agence France-Presse, May 20, 2008

“Texas Oil Analyst Says OPEC Vote Flawed”
KLBJ News Radio, May 20, 2008

“Pickens: Oil Going to $150, So Move to Gas”
CNBC, May 20, 2008