Today, the U.S. and its allies decided to release 60 million barrels of oil to offset some production lost with the fighting in Libya and to generally calm the markets. Oil futures dropped five percent, apparently in response to the move.
This is getting a lot of play and the message some people might take from it is that, "Oh, there's always more oil out there that we can release." Here's the thing, though. Those 60 millions barrels -- which sound like a lot! -- are about 18 hours worth of global oil consumption, or three days and change of just American oil consumption.
In other words, the release is peanuts in comparison to the scale of the oil economy. Putting that oil onto the market might have an effect for some small amount of time, but it's largely a gesture that traders are trying to play on the way down and then probably on the way back up. Meanwhile, the structural realities of an oil economy built on a resource that's ever harder to obtain go ignored. Instead, Americans get the message that there's always more where that came from.
I even found myself agreeing with the predictable Republican response to the move, which is relatively rare for me in energy policy.
"The Strategic Petroleum Reserve was designed for energy emergencies, not political convenience," House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) said in a statement. "Releasing our reserves to calm the market is emblematic of an Administration whose energy policy is irrational and counter-productive." Upton renewed his call for opening up new federal lands for additional domestic drilling.
At least until I really looked at it. Actually, the SPR, which grew out of the OPEC oil embargo, was designed to respond to political energy emergencies. And the Obama administration's energy R&D policies have been the best this country's seen. And that last part about renewed domestic drilling is just so unrealistic as to be laughable. We're just never going to drill ourselves back to low oil prices or to energy independence or to a low-carbon future. We're just not. The scale of how much oil we need doesn't match up with how much oil we've got. Any suggestion that drilling is going to help Americans at the pump is "irrational and counter-productive." It's so obviously and verifiably false that it borders on a lie.
Let's get real here: If we want to be insulated from high oil prices, we have to stop using so much oil. Period. Every indication is that oil markets like to boom and bust. That was true of the first oil field in the 1850s in Pennsylvania and it's true of our globalized market that sucks petroleum from every salt dome we can find.
You can take a positive view here -- that massive investment into electrifying transport and some combination of nuclear, renewables, next-gen biofuels, and coal with carbon capture will be able to provide the energy services currently provided by liquid fuel. Or you can take the negative view -- that nothing replaces oil and our societies are about to (or are) undergoing a huge and pretty terrible energy deleveraging. One could make a rational case for either scenario, I think.
In fact, the only scenario that doesn't make any damn sense is the one implicitly promoted by both parties: that things are going to be able to continue largely as they have and that we can solve the energy dilemma by tinkering around the margins. We can't.
Oh well, maybe China will figure it all out.