from Energy, Security, and Climate and Energy Security and Climate Change Program

What OPEC Can Teach the U.S. Department of Energy

September 21, 2012

Blog Post

Markets thrive when information is cheap, abundant, and reliable. This rule holds true for all sorts of markets, from housing to stocks to energy. More transparency in energy markets makes them better able to respond to supply-and-demand signals and makes pricing more efficient.

Many countries could help the oil market function better if they were more forthcoming about their supply, demand, inventory, and reserve data. The United States deserves credit for the enormous service it performs by releasing timely, comprehensive, and free information about the flow of oil within its borders. But is there more the United States could be doing at home to promote a sound oil market? I think so.

As I argue in a post on CNN’s Global Public Square (GPS), oil traders are becoming increasingly skeptical that the U.S. Strategic Petroleum Reserve (SPR) is as “usable as advertised,” as Citigroup’s Edward Morse detailed in a February 2012 piece in the Financial Times. Dramatic changes to North American oil infrastructure in recent years have raised legitimate concerns that unloading oil from the SPR can no longer be done as efficiently as it once could. Phil Verleger and others have also raised awareness of this important issue.

The U.S. Department of Energy can help address the market’s concerns in this respect, using a solution I propose in my CNN piece. It is in Washington’s interest to do so. If there’s one thing the United States should have learned from Saudi Arabia and its OPEC brethren, it’s that failure to stamp out skepticism about supply capabilities can have lingering malignant effects on the oil market. By shining a light on the U.S. SPR’s capabilities, the Department of Energy can continue to help foster a well-informed marketplace.