Should the US govt buy up massive amounts of crude oil on the cheap?

[Chronos]

If there is a finite amount of easily pumped light sweet crude, would a larger strategic stockpile make sense economically as we transition to more fuel efficient automobiles and alternative energies? One of the problems with developing these technologies is that companies cannot rely on the fact that oil prices will be high. Why make better cars or solar panels if gas might be cheap in a few months? Well, the US can ensure that doesn’t happen, thereby promoting a nice, safe, incubating environment to develop future technology.

And then, once those alternative energy technologies are in place, what will the government do with all of that oil it bought up?

What you’re missing here is that the current price of any stockpilable product is the market’s best guess as to that product’s expected average value in the future, discounted for time. In other words, when oil is cheap, it’s expected, on average, to remain cheap. So your scheme essentially amounts to the same thing as the government going down to Vegas and betting a few trillion dollars on the craps table. Sure, if they win, we could pay for a lot of things with that money, but that doesn’t mean it’s a good idea.

[Declan]

@The_Controvert

The US could refill the strategic petroleum reserve many times over and keep a giant stockpile of crude around. What’s the most the government could buy up on the cheap?

If the government later resold it at a profit, would it be enough to cover the recent bailouts, the entire national debt, pay for universal health care, alternative energy, the Iraq war, and also solve the Social Security insolvency crisis?

There is probably a shit load of countrys that would be very alarmed if the US started buying up lots and lots of crude oil. I believe that the strategic reserve was for 30 days of sustained combat operations among other things, so doubling or quadroopling the intake of crude oil , when its not nessesary, may cause other problems unintended.

Declan

[Lemur866]

Let’s put it another way.

If it’s a good idea for the US government to buy up massive amounts of cheap crude and sell it later when the price is high, why isn’t it a good idea for Saudi Arabia, Venezuela, Russia and Iran to do so as well?

Except their method of buying cheap crude would be not to pump cheap crude and leave that crude in the ground until sometime in the future. And the United States could do the same thing by suspending or drastically cutting back all domestic oil production.

So why do you think Saudi Arabia isn’t shutting down their oil wells until someday in the future when crude oil prices are sky high?

[The_Controvert]

@Lemur866

So why do you think Saudi Arabia isn’t shutting down their oil wells until someday in the future when crude oil prices are sky high?

Lack of long term thinking.