There is a fascinating commentary in today’s edition of the Wall Street Journal advocating the use of the Strategic Petroleum Reserve as a counter-cyclical tool to negate the pricing policies of the Organization of Petroleum Exporting Countries, OPEC.  Lincoln Anderson, an economist with a Boston-based finance firm, argues that the 701 million barrels of oil stocked up in the SPR are excessive and could be better used by adding supply to the U.S. market.  The goal would be to shave a little off the roughly $120 price tag for a barrel of crude.  Should OPEC increase production in the face falling demand, as it has done periodically, the SPR could purchase excess oil and work as a price support for the market.

The idea is that this sort of policy could lead to a little more stability in U.S. energy markets, easing the pain in times of high prices while ensuring that large price drops don’t distort the market and shift demand away from nascent sources of alternative energy.  Anderson believes a minimal reserve of no less than 120 million barrels of oil could be kept in the SPR at all times, an amount he states is greater than any one time drawn down in the SPR’s history.

This argument strikes me as an interesting one…one worth thinking about, given severity of the present energy mess we find ourselves in.  At the same time, I remain skeptical of the price-setting power he attributes to OPEC.  His own article cites the fact that OPEC’s control of oil production has declined from 52% in 1973 to only 40% today.  More importantly, he doesn’t take into consideration the ever-growing demand for energy in China and India, which may have more to do with today’s high prices than the cartel’s production policies.  Thoughts, anyone?