opinion | The fierce debate over oil price management (2023)

That deep reduction looks scary. Before joining The Times, I wrote articles with headlines like "Stay Covered in Strategic Oil Reserve" (2000) and "Secure strategic oil reserves for when they are really needed" (2012). I understand the concern of Rep. Cathy McMorris Rodgers, a Washington Republican whoCulpou-Bidenfor "exploiting" the strategic reserve.

For its part, the Ministry of Finance.estimatedthat the Biden administration's crude oil postings have cut the retail price of gasoline by about 40 cents, a welcome relief for consumers at a time of four decades of high inflation. Biden's Energy Secretary Jennifer Granholm cited that estimate last week in a letter to Rodgers, chair of the House Energy and Commerce Committee, and Frank Pallone Jr. of New Jersey, the committee's Democrat.

So it's not a black and white problem. After speaking with people on both sides, I believe that the large sales of crude oil from the Strategic Petroleum Reserve can be justified at high prices if the reserve can be replenished later at low cost, thus giving the government an advantage in transactions and sales that are managed in a way can be, which is not politically motivated and does not appear either. The first criterion is probably achievable most of the time. The second is more complicated.

There is an argument against dismantling strategic oil reserves that seems pretty silly to me. It is enshrined in the name of a Rodgers-sponsored bill thatProtecting the US Strategic Petroleum Reserve from Chinese law. the bill thatpastHouse 331-97 would ban the sale of the stockpile to any entity owned, controlled or influenced by the Chinese Communist Party, or any other entity that wishes to export the goods to China, on January 12. The flaw in the math is that the oil market is global and barrels are fungible. The additional shipments from the United States will benefit oil buyers around the world, regardless of whether certain molecules ultimately make it to China.

I also have my doubtsStrategic Production Reaction Law, which Rogersinsertedin the House on April 9. This would prevent the government from drawing on the Strategic Petroleum Reserve until it develops a plan to increase oil and gas production on public lands, except in the case of a "serious power outage," which "In his letter to Rodgers, Granholm wrote that the terms of the bill "would make it more difficult to take such action quickly to increase supply when the market needs it most."He also wrote that oil and gas producers "need not offer any other way."

Aside from these issues, the underlying economic question is whether it is practical to use the Strategic Petroleum Reserve to modulate prices, that is, to reduce both the highs and the lows, rather than simply dealing with emergency shortages, such as caused by an oil pipeline. are caused. Explosion or fire at a refinery, which has historically been the reserve's top concern.

Proponents of the idea include California Democratic Rep. Ro Khanna and Robert Hockett, a Cornell Law School professor who worked with Khanna to develop ideas for storing food and fuel to calm markets. Khanna wrote about the idea in aguest essayand The Times in June. hat hokettdiscussedIt's inseveral For youof himself

In an interview Tuesday, Khanna praised the Biden administration's big oil sales that mitigated the spikes, as well as government oil sales.declared goalBuy back oil to replenish reserves at prices ranging from $67 to $72 per barrel. The government hopes that a commitment to buy oil in this price range will help create a floor below the oil price, giving producers confidence that more oil will be worth pumping.

“I think President Biden had the courage to take action against the last 40 years of worshiping unrestricted free markets,” Khanna said.

Then again, you can imagine how that could go wrong. If oil goes too high and stays there, Biden or a future president could deplete the strategic oil reserve by trying to drive the price down. (A pilot program to replenish reserves recently failed when no producer would sell oil at the price the government was willing to pay.)

Hockett told me he believes the government can sell high and buy low, clearing the market and making a profit, by using statistical analysis to distinguish between speculative spikes and underlying price trends based on supply and demand. That is plausible if not correct. It is often quite obvious that a market is overbought or oversold, but no private player has a lot of money to compete against the crowd. The state, on the other hand, is the investor with deep pockets.

Politics is more difficult. It's hard to believe that Biden sold oil last year to depress gasoline prices, at least in part to improve the Democrats' chances in the midterm elections. Even if it is not true, the impression is unshakable. Hockett told me one answer might be to give the Federal Reserve, which is relatively insulated from politics, the job of buying and selling commodity derivatives like futures and options. However, Khanna said; "I don't know if you want to strengthen the Fed. They want democratic accountability."

Kevin Book, managing director of ClearView Energy Partners in Washington, DC, said the oil industry is divided over the strategic oil reserve. Some small, fast players don't like reserve releases because the releases deprive people of the ability to take advantage of high prices, while some big players value access to oil when commercial supplies are disrupted, he said.

Book said that if the government became a participant in the daily market and constantly suppressed price volatility through its buying and selling, some of the private market participants that perform that function today would fail, and stocks private oil companies that are expensive to maintain can do so. so shrink. "The question for the government is, how do you play that role without accidentally causing what you're trying to prevent?" she said. When I asked Hockett about this, he replied via email that the people Book was referring to were speculators who didn't calm volatility; they amplify it.

This debate will not end anytime soon.

Elsewhere: early retirement and cognitive decline

Maybe not retire early? A study of rural Chinese found that those who gained access to pension benefits at age 60 experienced faster cognitive decline than similar people living in parts of China that had not yet accessed the program. According to one report, taking advantage of the benefits "has significantly reduced social engagement, volunteering, and activities involving mental acuity."Articlein the January issue of the Journal of Economic Behavior & Organization by Plamen Nikolov, assistant professor of economics at Binghamton University, State University of New York, and Shahadath Hossain, a graduate student there. "We found the greatest impact of the program on subsequent recovery, a measure of cognition associated with dementia onset," the authors wrote. Previous research has found negative effects of "mental retirement" in high-income countries, including the United States.

quote of the day

"Despite having one of the greatest minds of his time under his command, the castaways on Gilligan's Island were unable to raise their level of technology to a high enough level to build a boat (although the Professor is capable of make a radio out of coconuts). close). Likewise, it would take forever, leaving Intel's top chip designers stranded on a deserted island before they could start building microchips again."

— Maciej Ceglowski,text versionfrom a conference on October 29, 2016

received feedback? Send a note tocoy-newsletter@nytimes.com.