Bob Tippee
The US should not tap the Strategic Petroleum Reserve in response to disruption of oil imports from Venezuela.
The temptation to do so is great. Prices of gasoline and other oil products have risen since strikes, which began Dec. 2, idled much of the Venezuelan oil industry. High-conversion refineries designed for Venezuelan crude are exhausting inventories and seeking feedstock from other sources.
SPR oil just sits there, tantalizingly close to some of the refineries that need it most.
But there it should stay. This isn't an emergency warranting an SPR drawdown.
The market can handle the Venezuelan deficit. It's already doing so. Elevation of oil prices hastens the adjustment.
Vital to the process is increased supply from other members of the Organization of Petroleum Exporting Countries. In a quick reversal of production strategy, the exporters' group has assured the market of extra oil to counter the Venezuelan upset. A hasty pull on the strategic hoard would be an unwarranted rebuke.
It also would shove the US into Venezuelan politics.
Refineries gaining most from an SPR withdrawal would include those owned wholly or partly by Citgo, which is owned by a North American subsidiary of Petroleos de Venezuela SA. That's the state oil company at the center of Venezuela's turmoil.
Inevitably, an SPR drawdown by the US would be seen in Venezuela as a provocation.
Spare production capacity exists in amounts sufficient to cover the loss of Venezuelan exports. But the adjustment takes time.
Supply strategy should focus on the possibility for other disruptions. They're not limited to war in Iraq.
To cite just one other potential trouble spot: Tension has risen recently between Iran's ruling clergy and a population fed up with hard-line theocracy. Strikes in oil fields there—such as those that inaugurated the Islamic Revolution of 1979—remain a nagging possibility.
Interruption of Iranian exports atop the Venezuelan slowdown would mobilize most remaining production capacity. It also would make loss of Iraqi supply for any reason difficult for the market to accommodate.
The US should wait until it faces an emergency like that before tapping the SPR.
(Online Jan. 10, 2003; author's e-mail: [email protected])