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by Scott Bernard Nelson
Last Updated: May 9, 6 pm EDT
Government's oil sale may have unintended consequences
An Energy Department official this week claimed President Clinton's April 29 announcement that the government would sell $227 million in oil from its reserves was a bipartisan effort to reduce the deficit. A week ago, the administration was playing it up as an election-year effort by Clinton to curb the recent runup in gasoline prices. Either way, say many economists, the sale may have inadvertently and permanently thrown the nation's Strategic Petroleum Reserves (SPR) into the political arena.
Congress created the SPR in 1975 so that foreign oil-producing nations wouldn't be able to use their oil shipments to the U.S. as leverage in international disputes. At the outset of Operation Desert Storm in 1991, for example, some oil was released from the SPR to offset the loss of Iraqi oil from the international market. In two decades, though, it was never used to balance the budget or to manipulate gasoline prices. Therein lies the danger of the government's recent sale, say economists.
"What this has done is open the door for politicians to decide when the gasoline price is inappropriate, which they're not elected or appointed for and which they're generally not trained for," says Bernard Munk, management professor at the Wharton School at University of Pennsylvania and former chairman of Penndel Energy Corp. "Now that the precedent has been set, it will be easy for future politicians to do the same thing ? especially if they're jockeying for position in an election year."
The only way out, says Munk, is for government to determine whether or not the SPR is still needed in the post-Cold War era and, if so, in what format. Anything, he says, is preferable to allowing the reserves to become a political pawn that artificially manipulates the market. But such a debate is not likely to happen this year, he concedes. "Unfortunately, political campaigns are not good times to raise complicated, long-term issues."
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