There’s little debate that hydraulic fracturing is responsible for a big part of the US shale oil boom that’s taken place in recent years.
During President Barack Obama’s term, the US Energy Information Administration estimated that for every barrel of oil extracted from the Bakken shale formation, which stretches across North Dakota, Montana and South Dakota, about 1.7 barrels of oil was released into the atmosphere.
For every barrel of oil extracted from the Permian Basin formation, which lies beneath Texas and parts of New Mexico, Delaware and New York, about 5.6 barrels of CO2 are released into the atmosphere, according to the EIA.
But did anyone consider what would happen if the US did the exact opposite?
That’s exactly what former Vice President Joe Biden did, and announced on 21 October 2017 that he would sign an executive order calling for the Trump administration to release crude oil from the Strategic Petroleum Reserve, which holds 727 million barrels, worth more than $40 billion at today’s prices.
For perspective, these funds are a separate political liability that could cost the Trump administration in mid-term elections scheduled for Nov. 6.
And why did the Trump administration decide to use this political weapon?
It’s more complicated than just using the SPR to weaken the Democrats. The Trump administration seems to have taken the opportunity of the electoral gridlock in Washington to go after oil giants like Exxon Mobil and Royal Dutch Shell.
“When they were lobbying Congress to get done this”, industry consultant Jamie Webster told us “they were saying, ‘look, let’s keep it out of the hands of the bureaucrats’. Now, if you do it, it will be under the regulator’s control.”
The oil released from the SPR would help push prices down even further, taking pressure off OPEC member nations to reduce production and possibly putting a floor under the price.
The decision to release the crude has also been put to a rubber stamp by the outgoing administration of the US Secretary of Energy Rick Perry and opposed by industry trade groups like the American Petroleum Institute.
On 7 December 2017, the outgoing energy secretary signed a memo that recommended that the administration find a way to use the SPR to help lower prices, after Trump asked the Energy Department to weigh in on the matter on 21 October 2017.
But before he makes the final decision, the Trump administration wants more advice and support from the incoming Democrat-controlled House of Representatives.
The Energy Department’s review process is well underway. From 21 October 2017, the DOE said it would release a final document on the SPR and the lessons learned from previous releases by the Obama administration in 2015 and 2016.
The issue will most likely be one that plays a major role in the negotiations about foreign policy following the mid-term elections in November.
Both parties in Congress would welcome such a move as it allows them to try and knock at the door of their rival without seeming to be directly threatening, according to industry consultant Jason Bordoff, who was a fellow in Obama’s White House’s Council of Economic Advisers.
But other analysts are concerned that the release may impact the US’s ability to negotiate with some key allies in order to bolster markets and decrease prices. For instance, some say Turkey could make certain moves over the next two months in order to counter the release.
“On the surface it looks very counterproductive, but when you start to peel away, it turns out to be not so terrible,” Bordoff said.