Why Trump Won`t Use His Ultimate Oil Weapon

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Last year. ahead of the return of U.S. sanctions against Iran. there was speculation that Washington could use crude oil from the U.S. Strategic Petroleum Reserve to cushion the blow that a loss of Iranian barrels would deal international markets and. more importantly. prices at the pump. Now. there seems to be the same talk again as prices remain excessively volatile.

Last year. the SPR speculation was rejected by Energy Secretary Rick Perry who said “If you look at the Strategic Petroleum Reserve and you were to introduce it into the market. it has a fairly minor and short-term impact.“

This time once again Washington’s response to higher oil prices for U.S. drivers as driving season begins is unlikely to involve selling crude from the SPR. There are a couple of reasons for this: first. the effect of tapping the SPR to stabilize prices could boomerang. and second. there is simply no need to tap it.

The Strategic Petroleum Reserve was formed after the 1973 Yom Kippur war when Arab oil producers turned the taps off to punish the U.S. for its support of Israel. The SPR is. in this sense. synonymous with national security. In this historical context. any news that Washington has decided to use oil from the SPR to keep prices stable could have a bullish albeit probably short-lived effect on prices.

As for the need to tap it at all. in a recent column for the Daily Telegraph. S&amp.P Global Platts’ Andrew Critchlow noted that use of the Strategic Petroleum Reserve is tightly regulated and there have only been a handful of instances in which presidents have indeed tapped the reserve to cap an oil price rise—invariably in circumstances much graver than the current oil price situation.

Now. there is no war against Iraq as there was when President George Bush Sr. used oil from the SPR at the start of Operation Desert Storm in 1991. There is also no devastating hurricane as there was in 2005 when Katrina wreaked havoc on the Gulf Coast refinery industry and emergency supplies had to be released. Finally. West Texas Intermediate is trading significantly below US$120. which is where it was in 2011. when President Obama tapped the SPR to put a lid on prices which had soared in the wake of the Libyan civil war.