In our opinion, Senator John McCain is missing an opportunity regarding ANWR, that remote corner of the world he deems too “pristine” a location for oil drilling. But it is more than a partisan political opportunity. America currently imports 70% of its oil, the lifeblood of the economy, up from 24% in 1970. For a country with America’s vast energy reserves and global responsibilities, such dependence on foreigners for a key strategic resource is irresponsible, almost beyond description.

We’re not claiming that ANWR is the answer to America’s energy woes, only that failing to exploit all good partial solutions is utterly foolish and an insult both to our forebears and descendants. Critics of drilling in ANWR claim that it would not have an impact on US energy supplies for a decade. Perhaps that is right, but so what? Americans have 30 year mortgages — what’s ten years in the scheme of things?

Currently, we are being held for ransom by global bandits who stick a gun to our heads and demand $4 or $5 for a gallon of gas. That is not only unacceptable but totally unnecessary. Right now we have a strategic petroleum reserve, stored in salt domes, that contains about 706 million barrels of oil. We are not using it, because it is for use in genuine supply emergencies, such as wars or other disruptions of that sort.

But we can triple the size of the SPR, and do it nearly for free, and use that reserve, not just for emergencies, but in cases like this, where the USA is being held hostage by foreign powers who do not have our best interests at heart.

How is such a thing possible? We should open ANWR and other such areas to oil production, with the explicit understanding that up to 50% of the output would be, market conditions permitting, allocated to a new 2 billion barrel Strategic Petroleum Reserve. Use of the new SPR would not be limited to supply emergencies, but could be used to lower prices when foreign powers hold a gun to the head of the American people. (It could take quite a while to fill the larger SPR with ANWR oil, and other oil that is currently off-limits, but experts say that just beginning that process would have a downward impact on prices.)

How is the 2 billion barrel new SPR free? Simple. The royalty charged by the US government to the oil companies for the ANWR drilling would be paid in oil into the new SPR. This is much like the concept of “production payment” financing that the oil industry has used for decades.

In practical terms, using the new, larger SPR might rarely or never become necessary. The very existence of such a large buffer inventory would be a permanent deterrent to the speculators who have magnified the current oil problems by crying “Shortage!” at every real or imagined opportunity. This is not a new idea. In the old days, a couple of decades ago, companies and countries regularly used buffer inventories to compensate for errors or disruptions in managing the chain of supply from the raw material to the finished product. But the change to “Just-in-Time” inventories, powered by computerized planning and the internet, changed all that.

A 2 billion barrel Strategic Petroleum Reserve (about 100 days of total US crude needs) would go a long way to correcting our current situation. A President who could credibly say “If you hold us up, we’ll just turn the spigot to ON” would have lot more power than one who goes hat in hand to the Saudis. It’s pathetic that Americans have been reduced to begging. Selling the idea of drilling in ANWR and other government-owned areas as at least a partial answer to America’s policy of begging countries like Saudi Arabia (let alone Iran, Iraq, Venezuela, etc.) for help seems to us both good policy and good politics.

This entry was posted on Wednesday, July 9th, 2008 at 2:04 am and is filed under General, MSM, business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.