Why DON'T WE Tap The Strategic Petroleum Reserve?

ralph124c · March 7, 2011, 6:20pm

I just paid $4.55/gallon for heating oil-isn’t it time?
Why not?

DrFidelius · March 7, 2011, 6:25pm

Because the Government doesn’t care how much we are spending per gallon as long as there are enough gallons to go around? Higher prices are not necessarily a sign of a shortage that woudl require federal intervention.

Lemur866 · March 7, 2011, 6:29pm

Because cheap petroleum isn’t the God-given birthright of every American. Petroleum is a commodity product and it’s price is driven by global supply and demand. The government can’t wave a magic wand to drive down prices. The methods used to drive down prices all have disastrous secondary effects. Do you want to pay higher taxes for the privilege of paying lower fuel prices? Or how about, the people who buy fuel pay for their own damn fuel, and stop expecting Uncle Sugar to subsidize them?

Alessan · March 7, 2011, 6:46pm

Isn’t the point of a reserve to serve as a reserve?

shiftless · March 7, 2011, 6:54pm

I don’t think making sure my vacation is a cheap as possible is one the strategic goals of the US. Making sure the infrastructure of the nation continues to function, maybe. Making sure my V8 SUV is fully air conditioned to a comfortable temperature, sadly no.

iamthewalrus_3 · March 7, 2011, 6:54pm

Because the purpose of the reserve is not to buffer against minor price fluctuations. It’s to be used strategically when the outcome matters in a substantial way.

I moved closer to work six months ago and walked to work today because the price of gas is going up.

How about you consider tapping into a strategic sweater reserve?

John_Mace · March 7, 2011, 6:55pm

Yes and no. It’s a reserve, but it’s not meant never to be taped. However, the purpose of the SPR is to help during a severe disruption in the flow of oil, not to modulate the price of the product in the absence of a real shortage.

We’d then need to replace that reserve, and pay a premium for doing so.

lieu · March 7, 2011, 7:01pm

Because, as Daniel Yergin says, doing so wouldn’t do anything to address the underlying cause of the recent price escalation, the unrest in North Africa and the Middle East. That and it’s not meant as a hedge against unpalatable prices but instead a resource for strategic use during periods of prolonged supply disruption.

Mr.Moto · March 7, 2011, 7:14pm

Why not investigate other methods of home heating?

gravitycrash · March 7, 2011, 8:45pm

Because there isn’t an oil shortage.

The Saudis are supposedly pumping more oil to calm the markets but I’m not seeing anything coming from them politically to help calm the oil speculation. Nor am I hearing anything from the other big oil producers in the Middle East like Kuwait or the UAE.

That’s okay, when the US economy goes back into the shitter, they can help bail us out, right?

With friends like these…

The_Second_Stone · March 7, 2011, 8:52pm

Because all parties in the government think that the oil corporations should be allowed to gouge everyone without market interventions. I think we should tap it. In short, I’m agreeing with Ralph. Can Armageddon be far behind?

RickJay · March 7, 2011, 9:00pm

If the oil companies were out to gouge you, why did they wait until now? If they’re conspiring to jack up prices to $4.50 a gallon, why weren’t prices always $4.50 a gallon? Why were they giving you a break last year?

CurtC · March 7, 2011, 9:11pm

Isn’t it pretty much the consensus of anyone with a long-term view of social health, that the price of oil is currently too low?

Bryan_Ekers · March 7, 2011, 9:20pm

Next up: why DON’T WE dig ditches with tactical nukes?

levdrakon · March 7, 2011, 9:45pm

Yeah! Every time they jack the price up, I feel healthier. They should keep jacking the price up until I’m immortal!

salinqmind · March 7, 2011, 10:00pm

Just because it’s there doesn’t mean we should use it, just because it’s there. Its for when the US is eventually in dire straits.

People have to put gas in their cars, and it costs a lot, but they have to learn how to manage to do it. I don’t understand why this is hard to grasp. I have a friend living in her McMansion down the road, she has a good job, but she still buys mochachinos at Starbucks, she just bought $100 worth of makeup at Sephora, $20 bottles of shampoo, goes out to lunch every single day (and not at a fast food joint)…on and on. Because she ‘deserves’ the very best. And then she bitches endlessly about the price of gas. She’s still living and spending like she did 5-10 years ago. She just doesn’t GET it.

Alessan · March 7, 2011, 11:15pm

It’s hard to grasp for two reasons:

People have a hard time understanding the concept of an actual shortage.
People have a hard time seeing an asset just sitting there, doing nothing; it goes against their investment/leveraging/just-in-time instincts. They don’t get that someone won’t just loan them more oil if they ever run out.

Gorsnak · March 7, 2011, 11:19pm

Use the strategic reserve now and you’re really going to kick yourself when protests in Saudi Arabia disrupt production there to the tune of 4 million bbl/day for two weeks and the reserve is empty.

LonghornDave · March 8, 2011, 12:05am

I certainly don’t agree with releasing oil from the reserve now (in fact we should keep injecting), but it isn’t true to say it has only been used in the past in emergency situations.

Three times during 1996 the administration and congress authorized non-emergency sales.

DOE:

Non-Emergency Sales
Although the Reserve was established to cushion oil markets during energy disruptions, three times during 1996, non-emergency sales of oil from the Reserve were authorized by Congress to raise revenues. The total quantity sold was 28.1 million barrels.
1996 Weeks Island Sale. The first sale was requested by the Administration to pay for the unexpected decommissioning of the Weeks Island Strategic Petroleum Reserve storage site. A fracture in the overburden above the converted salt mine - the only site in the Reserve that used a former mine to store crude oil - threatened the site’s geologic integrity and its 73 million barrels of crude oil. On October 5, 1994, the Energy Department had announced that it would begin transferring the oil to other sites to reduce the threat of its catastrophic release into the environment. The cost of the transfer and subsequent site decommissioning was estimated to be $100 million. To pay for the effort, the Department proposed to sell up to seven million barrels of the Weeks Island inventory. Congress approved the sale in the Balanced Budget Downpayment Act, enacted January 26, 1996.

On January 29, 1996, the Defense Fuel Supply Center, acting as the Energy Department’s sales agent, issued a solicitation to industry for competitive offers to purchase Weeks Island oil. Subsequently, on a two-week cycle, beginning February 20 and ending March 21, offers were received, negotiations conducted, and contracts awarded to those offerors bidding prices consistent with the oil’s market value. Six contracts were awarded to four oil firms for 5.1 million barrels. Deliveries were made between March 4 and April 21, 1996. Payments to the U.S. Treasury totaled $97.1 million, or $18.95 per barrel.

1996-97 Sales to Reduce the Federal Budget Deficit. The second sale of Weeks Island crude oil was directed by Congress in the Omnibus Consolidated Rescissions and Appropriations Act of 1996, enacted April 26, 1996. It required the sale of $227 million worth of oil during fiscal year 1996 to reduce the federal budget deficit. This sale was performed in the same manner as the first. From May 22 through August 5, 1996, the Defense Fuel Supply Center awarded twenty-four contracts to nine oil companies. Deliveries of 12.8 million barrels were made from May 26 through September 17, 1996. This sale yielded $227.6 million in revenue for the U.S. Treasury, or $17.81 per barrel.

The third sale was directed by the Omnibus Consolidated Appropriations Act for Fiscal Year 1997, enacted September 30, 1996, and called for the sale of $220 million worth of crude oil to offset fiscal year 1997 appropriations. On October 3, 1996, the Defense Fuel Supply Center issued a solicitation to prospective offerors requesting bids to purchase West Hackberry sour crude oil, and a small quantity of sweet crude oil in the pipeline connecting the West Hackberry site with the Sunoco Marine Terminal in Nederland, Texas. The first purchase contracts were awarded on October 24, 1996, and by December 5, 1996, the Defense Fuel Supply Center had awarded twenty contracts to seven companies for the purchase of 10.2 million barrels to yield about $220 million in revenue. The first delivery occurred on October 29, 1996 and all deliveries were completed by January 1997.

pohjonen · March 8, 2011, 12:18am

I for one am pretty sure the reserve was never intended to help out the general population, but is there for the use of government should real and lasting shortages develop. That’s my uneducated guess anyway.