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Tuesday, August 05, 2008

Under the most favorable characterization, Obama displays the stupidity of youth in urging the tapping of the Strategic Petroleum Reserve

Depending on the circumstances, sometimes only a few years' difference in life experience can translate into an enormous gap in wisdom.

I was born in November 1957, at the tail-end of the Baby Boom. Teens from small towns in the west Texas prairies learned to drive early in those days. I'd actually been driving when I ought not, with my parents' knowledge and consent but without lawful authority, for quite some time. But I got my full-fledged drivers license — to replace the provisional "hardship" license I'd previously held, which allowed me to drive to and from work in daylight hours — in November 1973, when I turned 16 during my junior year in high school. By then, I had family spread across the State of Texas, and whether to visit them or for extra-curricular events and college interviews, I had frequent need to take cross-state driving trips in which I'd be the one paying to fill my own gas tank.

Gas station lines like these weren't just common, but universal, during late 1973-early 1974 But as it happened, 1973 was a momentous year in world history far beyond the prairies of west Texas. The Israeli armed forces had bounced back from their initial losses to a combined sneak attack of Arab countries on Yom Kippur, October 6, 1973, and by October 24th — with the essential support of the United States — they had inflicted even more humiliating losses on Egypt and Syria that are still reflected in the maps of today's Middle East. In sympathy with their Arab brethren, and in retaliation against the United States, Saudi Arabia, Libya, and other Arab states began a total oil embargo against America on October 19, 1973.

President Nixon did the right thing in backing up Israel. But ordinary Americans, from the top to bottom of society and across our entire nation, paid a price — and not just in dollars! Gasoline didn't just become more expensive, it became unavailable. There was nationwide, mandatory gasoline rationing in late 1973 and early 1974: Drivers could only buy gasoline, if they could find it at all, after waiting in long lines on either odd- or even-numbered days of the month (depending on the last digit of their license plates). Driving from, say, Lamesa to Austin suddenly became an exercise in strategic planning, scrounging, and guesswork about which towns en route might have open stations, especially if (as I was obliged to do) you were traveling on a weekend. Gas stations open on Sundays became rarer than hens' teeth.

The dislocation of the American lifestyle and economy was vastly greater than anything America had experienced since World War 2, and vastly greater than anything America has experienced since then — including the first Gulf War, the Iraq War, and the current sharp rise in world-wide oil and refined gasoline prices.

Legislation passed in 1975 to create America's Strategic Petroleum Reserve was the direct result of this crisis. It's not much, but it's better than nothing, and it gives us a little flexibility, for a little while, if the fit hits the shan again and we can't count on any OPEC country delivering another barrel of oil to us at any price.

Barack Obama, however, was born on August 4, 1961. During the 1973-1974 oil embargo, Obama was 12 years old, living with his grandparents in Honululu. I feel pretty safe in assuming that he wasn't planning any cross-state or cross-country automobile trips, or trying to fill up his grandparents' gasoline tank, during that crisis.

That complete blank spot in his personal experience — plus the politician's normal desire to pander, and the Democratic Party's utter failure to come up with anything remotely resembling a responsible energy policy — together make up the only conceivable explanation for his monumentally, colossally, inexcusably STUPID proposal that we tap the Strategic Petroleum Reserve today.

1973-1974: Gas rationing, often no gas at allIt's one thing to stop making further purchases, and to stop the continued filling of the reserve, during times when crude oil prices are high and crude oil supply is tight. That's always been part of the plan for the Reserve, and it simply makes market sense. The whole point of the reserve is to buy gradually, especially when oil is comparatively cheap and plentiful, and then to hold it for a crisis.

But it's simply inconceivable to me how anyone who had a drivers license in 1973-1974 and lived through that genuine crisis could think our present situation — in which gasoline is expensive, but universally available — is even remotely the kind of circumstances for which the Strategic Petroleum Reserve ought to be tapped. We're many, many times more vulnerable to an embargo now than we were in the mid-1970s; our need for a strategic reserve is therefore many times greater. And our current high gasoline prices — while awful if you're on the margin in a business particularly dependent on gasoline prices, and while unpleasant and unhealthy for the economy as a whole — cannot realistically be described as a national strategic crisis by anyone who understands either the word "strategic" or "crisis." Finally, the resulting drop in gas prices would be even more fleeting and insubstantial than that which would result from McCain's proposed gasoline "tax holiday" (which, as Obama has consistently argued and a genuine, near-universal consensus of energy economists have agreed, is also a campaign gimmick and a very stupid idea).

Do not be misled by double-talk of Obama aides:

His proposal comes a month after Obama said he would consider using oil from the reserves only in a "genuine emergency," such as "terrorist acts." Aides said the plan is not a reversal because he would replace light crude oil in the reserves with less-expensive heavy crude. They also noted that the senator from Illinois last week described the country's economic conditions as an "emergency."

Use your common sense: Why do you think heavy crude is less expensive? It's filled with more sulfur and other contaminants that, in turn, require more expensive refining processes that are less widely available. Anyone who tells you that a barrel of heavy crude and a barrel of light, sweet crude are fungible is a damned liar, and they're taking you for a fool to boot. This is like saying, "I'm not depleting the funds in my emergency cash stash by removing the $20 bills; why, for every $20 bill I'm taking out, I'm putting a $10 bill back in, so there's no depletion at all!"

Those who are too young to have experienced the 1973-1974 crisis, who can't remember it at all or can't remember it as vividly as I do, and who haven't learned about it in their study of American and world history, I can forgive if they're not running for president. But for someone purportedly as smart as Barack Obama, with prestigious degrees from Ivy League universities, who's making grand plans to utterly transform the American energy economy, there is no forgiveness available. Anyone in those circumstances who's making this argument is either an utter fool or a craven traitor to America's long-term interests, or both.

Either way, Obama is proposing to sell out America's long-term strategic energy interests in order to get elected. It's exactly that simple.

Posted by Beldar at 04:26 AM in 2008 Election, Energy, Obama, Politics (2008) | Permalink


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(1) Phelps made the following comment | Aug 5, 2008 9:45:59 AM | Permalink

As McCain said, he would rather lose a war than an election.

(2) Gregory Koster made the following comment | Aug 5, 2008 10:09:05 AM | Permalink

Dear Mr. Dyer: I'd put it slightly differently. It makes sense to release oil from the Reserve, on the "buy low, sell high" theory. The government makes a profit, and prices steady. What's the catch? It's the notion whoever gives the order to sell is smart and nimble enough to foresee market peaks and valleys, and take advantage of this superior wisdom. Does Obama think he is smarter than everyone else combined? The question answers itself. Does Obama have any experience in top bossing, thus finding out how unwieldly large organizations can be? He does not. These two conditions, plus the arrogance for which The One is noted, explain this decision. Obama is not only witless, he doesn't realize that he is witless. Dangerous combination.

Final note, even if he has no vivid memory of the 1973-74 gas shortage, he should remember the almost-as-bad 1979 one. By then he was driving. But, alas, even if he does remember, he knows that he is smarter than Jimmy Carter.

Sincerely yours,
Gregory Koster

(3) kimsch made the following comment | Aug 5, 2008 11:52:55 AM | Permalink

Barack Obama is just under a year older than I am, but I, like you, remember those gas lines and odd and even days vividly. Stuck in the car with my little sister, no air conditioning, manually rolled down windows and for hours at a time. I remember Mom driving for miles to find an open gas station that had gas. We got gas whenever we could.

We're doing the same now, filling up when we get to about 3/4 of a tank. Psychologically it feels like we're not spending as much since we're spreading that "full tank" over four visits. We're also assured that we won't run out of gas and be forced to purchase it at a higher cost than we might otherwise have to.

Mr. Obama (my junior senator who is not doing the job he was "hired" for btw) keeps running against George Bush. He says that McCain will be George Bush's third term. Mr. Obama is rapidly moving towards being Mr. Carter's second term.

(4) Beldar made the following comment | Aug 5, 2008 5:43:55 PM | Permalink

Mr. Koster: The Strategic Oil Reserve isn't intended to make a profit, nor should it. It's not remotely close to being full; we don't have a remotely adequate strategic reserve yet, especially given that our needs continue to grow right along with the risks from an embargo.

(5) Gregory Koster made the following comment | Aug 5, 2008 10:09:52 PM | Permalink

Dear Mr. Dyer: You are quite right on all your points. My comment was an attempt to explain why The One made his statement, not as a prescription for action. I do hope, though, that the SPR is not being filled at this moment. With prices artificially high thanks to Congress's diabolic captivity to the radical environmentalists in refusing to roll back the offshore drilling ban, now is not the time to buy. It's a time to wait. It is clever politics for Pelosi to block the vote on rolling back the ban. It would likely pass. But what are the voters of the nation to do? Pelosi's constituents aren't about to can her, no matter how high gas prices go in their district. She takes the heat, and allows Obama to tack toward the center, trawling for suckers. If he gets elected, look for a big White House payoff to Pelosi.

I'd oppose using the SPR as a means of trying to stablize prices even if Mitt Romney were Prez. Mitt has enough smarts and chops that he might be able to do it, but all that would do is set a precedent for the less-talented but far more egocentric to think they can do it too. You are bang right that more needs to go into SPR, but not just yet.

Did you see the line at CLASSICAL VALUES today that characterizes McC as "a Scoop Jackson Democrat?" That's much more apt than I would like it to be, but that's as good as it will get in 2008.

Vote for the Grumpy Old Man.

Sincerely yours,
Gregory Koster

(6) Wallace made the following comment | Aug 5, 2008 11:40:26 PM | Permalink

I too was living in Honolulu in 1973-74, in the army. I was driving a Corvette. We could buy 5 gals of gas every other day. I didn't drive much. You're right though, I don't recall seeing Obama at the gas pumps. :>]

(7) steve sturm made the following comment | Aug 6, 2008 8:22:08 AM | Permalink

..the resulting drop in gas prices would be even more fleeting and insubstantial..

I disagree. My goal in releasing oil from the Reserve is not to attempt a permanent altering of the supply/demand relationship, as a temporary and finite change in the supply ought not have an effect on long term pricing, but rather to burst the bubble that has driven prices higher than they fundamentally should be. Just as the event(s) that lead to a bubble can take many forms, so too can the pin(s) that pop the bubble. And if releasing X% of the Reserve does the trick, great. If not, then we try something else.

(8) hunter made the following comment | Aug 6, 2008 10:24:51 AM | Permalink

Hmmmm....If I was Chavez and the Iranians, and I watched the US squander its petroleum reserve, I would then know precisely when to start the next oil embargo/blockage: The day after the reserve went critically low.
Not only are the democrats, in their present incarnation, naive, they are stupid beyond all belief.

(9) Red made the following comment | Aug 6, 2008 12:43:19 PM | Permalink

The Strategic Oil Reserve (or Petroleum Reserve) was always intended to be a "set aside" for military use---in the event of a national catastrophic need. Like another world war.

(10) Carol Herman made the following comment | Aug 6, 2008 2:11:15 PM | Permalink

First of all, most of the people who like Obama haven't got a clue about "oil reserves." All they know is the price at the bump. And, that makes the angry at republicans. Why? This segment hates republicans as a general rule.

Though, sometimes, ya can get fooled. For instance: Mayor Fiorello LaGuardia was a REPUBLICAN. (I didn't know that until very recently. I didn't even know his mom was Jewish.) But he was very successful in New York. People loved him as mayor.

And, one of FDR's compliments, when he first met Churchill, was to say that Churchill reminded him of Fiorello LaGuardia. One politician recognizing the skills in another.

Can Obama win?

Gee, I don't see how any candidate that appeals only to the base, can pull in votes, these days.

Though it seems that in Congress it's the republicans who have lost seats.

And, maybe that's why a "safer bet" for president was in giving McCain the nod?

No one can complain that the republicans didn't have a stage full of monkeys up there, vying for votes during state primaries.

A comment I saw today said that our political process gets more SURREAL with each passing election.

I'll buy that.

(11) Milhouse made the following comment | Aug 8, 2008 3:58:45 PM | Permalink

by October 24th — with the essential support of the United States — they had inflicted even more humiliating losses on Egypt and Syria that are still reflected in the maps of today's Middle East.

No, they're not. Israel came out of the '73-74 war with a net loss of territory, thanks to the concessions the USA wrung out of Israel as the price of aid. The disastrous losses of the first days of the war were also the result of Golda Meir's decision not to strike first, which she explicitly made out of fear that if Israel struck first the USA would call her an aggressor and refuse to resupply her. The resupply was utterly necessary for Israel's survival, but the price in lives and territory was heavy.

Gasoline didn't just become more expensive, it became unavailable. There was nationwide, mandatory gasoline rationing...The dislocation of the American lifestyle and economy was vastly greater than anything America had experienced since World War 2, and vastly greater than anything America has experienced since then

This was not the result of the embargo but of price controls. Since prices couldn't go up, rationing had to be imposed another way. Since gas stations couldn't charge more, they had no reason to open at inconvenient times, or to increase their orders and bid up the available supply, as they would do now.

In any case, an embargo today simply wouldn't work. It's a global market, and if the Arabs won't sell to us, plenty of other suppliers will. If worst comes to worst, we can always go to war to secure our oil supply, which is what any self-respecting country (e.g. Japan) would have done up to about 50 years ago.

(12) Beldar made the following comment | Aug 8, 2008 6:24:22 PM | Permalink

Milhouse, thanks, as always, for your comment, which are always thought-provoking.

The Yom Kippur war in 1973 didn't produce the easy victories that the Six Day War in 1968 1967 had, but I stand by my claim that despite initial Arab successes — indeed, precisely because they were so dramatically reversed — by the end of the Yom Kippur war, Israel had indeed inflicted additional humiliating military losses, including the encircling of the Egyptian Third Army and the landing of Israeli forces on the far side of the Suez Canal. (I would concede that "additional" is the better descriptive for the losses than "more" here, which you may have read as meaning "more humiliating in comparison to those from 1968 1967.") Moreover, those losses are indeed represented on today's maps — most importantly in the Gaza Strip and the Golan Heights, which remain major bones of contention today. The latter, in particular, was a territorial acquisition of strategic value to Israel vastly disproportionate to its acreage. You refer to it as the "1973-1974 war," but although the Yom Kippur war began on October 6, 1973, the cease-fire was on October 26, 1973. There were adjustments to the lines made, and an exchange of POWs, in 1974, but no more fighting of consequence. During the fighting, the casualty rates were indeed high, and the greatest casualty may have been the Israeli sense of invulnerability that had prevailed after the 1968 war. But Israel didn't lose significant amounts of territory in the fighting itself, and the enormous change in territory — the restoration of the Sinai to Egypt, which I assume is what you're referencing as "the concessions the USA wrung out of Israel as the price of aid" — didn't take place until 1978, with the Camp David accords between Begin and Sadat (well-lubricated by American foreign aide to both sides that still continues today).

I would agree that price controls on so-called "Old Oil" being produced within the U.S. contributed to the 1973 gasoline shortages along with the embargo. I also agree that an embargo today would be more difficult for OPEC to self-police with the same degree of effectiveness. I emphatically disagree with your blithe presumption that today's market will necessarily and inevitably remain global at all times and in the face of all crises, and that "if the Arabs won't sell to us, plenty of other suppliers will." Rather, I don't have much trouble imagining scenarios in which not only the Arabs, but also the Venezuelans and even the Mexicans and Canadians stop selling to us quite abruptly.

Night after night I listen to Alan Colmes repeat what he thinks is an unanswerable one-liner: "If more domestic oil drilling is such a good idea, why do we sell oil we produce offshore from Alaska to Japan now?" The answer — which I believe he knows and cynically conceals, because he can't possibly be as stupid as he sometimes acts — is that in today's market, barrels of oil are indeed fungible, and it makes economic sense to treat them as such, which includes minimizing transportation costs where possible. And indeed, because the Japanese are our strategic ally, we may have an interest in continuing to supply them in times of hardship, so long as they remain allies. But ultimately, it still is important that we could, if necessary, assert sovereignty over those particular barrels of oil if pinch came to shove. That production source materially adds to American's national security, even if we choose to send those barrels elsewhere for now and replace them with barrels being shipped from, say, Saudi Arabia to the American east coast.

Your glib final comment — that at worst, we can go to war to secure our oil supply — is true but a worst-case scenario that I do not believe to be at all realistic. In any scenario in which we do that, we'll already have turned our internal economy and lifestyle upside down. It would take a radical transformation, both of us and of the rest of the world, before we would ever assert our latent and potentially imperial power to that degree.

(13) Milhouse made the following comment | Aug 9, 2008 10:07:19 PM | Permalink

Beldar, no, I'm not talking about Camp David, though that's another instance of Israel taking a blow for the USA. But I'm talking about the 1974 armistices that ended the war.

The Golan Heights are indeed a very strategic acquisition Israel made — in 1967. The further territorial gains Israel made in 1973 are not reflected on today's maps, because Israel returned all of that territory and more in the 1974 armistices. Despite being militarily defeated, Egypt and Syria came out of the war ahead of where they started, because Kissinger made Israel give them some of the territory they had lost in 1967; the threat behind that pressure was that if Israel didn't make these concessions there would be no more arms sales, and the Arabs would be free to attack again.

(14) Beldar made the following comment | Aug 10, 2008 5:32:19 AM | Permalink

I've corrected my errors in the comment above to reflect that the Six-Day War was in 1967 (not 1968). I've read, and the map I linked above reflects, that there was additional territory in the Golan Heights that Israel captured in 1973. Perhaps it was returned in 1974, I don't know. Your main point -- that the 1973 Yom Kippur war didn't produce territorial gains for the Israelis -- is undoubtedly correct, and to the extent my original post or later comments implied otherwise, they were not well drafted. I continue to believe, however, that from the perspective of a disinterested outside observer with the benefit of hindsight, even though Israel didn't win the kind of lopsided victories it won in 1967 in the Six-Day War, its come-back in the Yom Kippur War was nevertheless impressive; and in any event, we agree that it was facilitated by the U.S. airlift and other aid, which had the effect of enraging the Arab members of OPEC and triggering the embargo. There are many plausible hypothetical scenarios in which such rage could be triggered again. We still need a strategic petroleum reserve.

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