Liberal billionaire George Soros suggested that President Barack Obama release oil from the country’s strategic reserves to lower gas prices and “ruin” Russia’s energy-dependent economy.
Soros told a panel in Berlin last week that the best way to sanction Russia for its actions in Ukraine “is in the hands of the United States,” because its oil reserves can depress the price of oil, reports Bloomberg.
“The strongest deterrent is in the hands of the United States because it can release oil from the strategic oil reserve, which would then reduce the price of oil, and that would ruin the Russian economy, which lives on oil,” he told Marketplace in an interview published Wednesday.
“The Russian economy is very weak because the oligarchs who run the country don’t trust it and they send their money abroad,” he added. “So if you stop the inflow of funds, that will bring the Russian economy to its knees.”
“Ukraine is determined to reform, but it needs protection,” Soros continued.
Energy Secretary Ernest Moniz has dismissed the idea of using the U.S.’s Strategic Petroleum Reserve (SPR) to punish Russia, but others have gravitated towards the idea. Former Ford and Carter administration official Philip Verleger said that U.S. SPR reserves could reduce oil prices by $12 per barrel by releasing 500,000 barrels of oil.
Verleger added that lower oil prices would cost Russia about $40 billion in oil and gas revenues, or about 2 percent of its economy. Carl Larry, president of Oil Outlooks & Opinions LLC, told Bloomberg that releasing SPR oil would also lower costs for refiners and boost U.S. exports while reducing U.S. oil imports.
“We can increase exports and the U.S. wins on all levels,” Larry said. “Refiners have better margins in the U.S. and we push out exports from Russia.”
But releasing oil from the SPR is a double-edged sword. Oil prices are set in global markets, meaning that hurting Russian oil revenues would also hurt the bottom lines of U.S. oil companies.
“If you use oil and aim it at Russia, you’ll hit Texas,” Kevin Book, managing director of ClearView Energy Partners LLC, told Bloomberg. “Besides the intrinsic problem of taking your safety net and burning it for a flash in the pan, we’re not the low-cost producer.”
The effects of an SPR release will also likely be temporary. When the Obama administration released 30 million barrels of oil from the SPR in 2011 during the Libyan civil war, prices were only depressed for a few days. Within a week, oil prices were right back to where they were before the SPR release — which was also complemented by the release of 30 million barrels from other countries.
The reserve was established in the aftermath of the 1973-74 oil embargo. It has a capacity of 727 million barrels of oil and was intended to give the president a tool to respond to disruptions in the oil supply that threaten the U.S. economy. The government has released oil from the reserve three times in the past.