Tapping Strategic Reserves Is A Ploy

In response to the attack on the Saudi oil refinery, Trump has said he will tap the National Strategic Reserve. This is a ploy. If not for it being a ploy, I would be forced to say, “My, how SOCIALIST of him.”

The strategic reserve is in place to safeguard against a national oil and gas shortage, as happened in the early 70’s. We are not there, nor are we at risk of being there.

Not long ago, Trump was crowing about how the US is now a “net” oil exporter. Meaning we export more oil than we import. We still import oil. Lots of it from Saudi Arabia. So, what’s the problem? Stop exporting, right?

Wrong. There are several issues at play here.

First, ceasing the export of US oil would mean impacting the petrodollar system directly. Which will already see a significant impact because Saudi oil is sold anywhere in the world in dollars, a significant portion of the petrodollar system and the original petrodollar itself. For that to be reduced by half takes a huge bite out of the petrodollar system because a lot fewer dollars are being traded internationally. If we stopped exporting oil, that would result in a drop of roughly 75% of the value of the petrodollar itself. Assume import/export to be equal, so 50/50. Half of the imports gone means a reduction of 25% of the petrodollar. Reduce export by 100% and you cut another 50% of the petrodollar value.

Second, this is a giveaway to the oil companies. There is no federal oil refinery, no federal wells in operation. What comprises the strategic reserve is purchased from oil companies at roughly market price. In other words, it was replenished while the cost of oil was low. Now, if we exhaust some or all the reserves, they will have to be replenished later. At higher cost to us, higher profit to oil companies.

All of this is aside from this action being extremely dangerous. Who is to say that Yemen will not destroy another Saudi refinery? Even if they do not, what happens if we deplete the reserves while we do not need it, then run into the situation that we do need it?

The short answer is, we’d be screwed. The major purpose of the strategic reserve is so that the military and government can keep functioning in an emergency. Not the whole country. Deplete the reserves and then have an emergency, that would mean the government and military would be stopped in their tracks.

In fact, the world is watching. Including Iran. If we attack Iran, they could very well attack the other Saudi oil refinery/ies, reserves and naval ports. That would crush the petrodollar, freeze the country and partially cripple the military.

I see a ration card in your future.

Understand, we do not produce enough oil to be energy independent at current capacity. I don’t know the actual numbers but will give an example. Say we use 120 gals of oil per day. We export 50 barrels per day and use 50. That means 70 barrels of what we use is imported. If we stopped importing, we would still be 20 barrels short.

“We can just buy more oil from other countries.”

Wrong, bucko. The Saudi reduction in oil means less oil sold to all countries that buy from them, not just the US. So there will be fierce competition to buy oil from other sources. We would be one in a crowd, all fighting for the same scraps.

The fact is, a small, war torn country in the Middle East may well have just figured out a way to destroy the United States as we know it. Without ever having to threaten us directly. I don’t know about you but after all the weapons we’ve sold Saudi Arabia, I’d call that karma.

I’d say it’s about time the US stepped up to the bargaining table and stopped being the bully/bully’s friend. No threats are going to help with this. Only a diplomatic solution will do anything worthwhile.

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