Posts tagged “SPR”
The SPR Grew Without Buying A Barrel
Although mainly focused on the oil market’s current jitters over Syria, Liam Denning’s Wednesday “Heard on the Street” column in the Wall St. Journal neatly highlights the extraordinary degree to which resurgent US oil production and weaker US demand have boosted the effectiveness of US oil inventories, including the US Strategic Petroleum Reserve (SPR). Without adding a drop — the SPR actually shrank a bit in 2011 — the reserve’s potential to replace daily imports in a crisis has soared as those imports have declined.
In the near term this could prove extremely helpful should expected US-led reprisals against the Syrian government result in a regional disruption of oil flows. Longer term, it serves as a further reminder that the existing SPR was designed for another era and is overdue for a major rethink.
Release of up to 180 million barrels discussed at White House meeting
With benchmark Brent oil futures moving back over the $110 per barrel line and threatening to continue to slow down an already sluggish American economy, President Barack Obama met Thursday with oil market experts as it considers dipping into the Strategic Petroleum Reserve (SPR).
Analysts speculate that this second release of emergency oil reserves could be much larger than the last as officials attempt to bring soaring fuel costs under control while also making up for lost production centered around the passing of Hurricane Isaac last week. While gas prices were expected to drop sharply following the Labor Day weekend, high prices have persisted, forcing the Obama administration’s hand in reopening plans that were originally shelved in the spring.
In Issue #7 of Energy Trends Insider, a reader asked about the potential implications of the Obama Administration’s recent announcement that they were considering a release of oil from the Strategic Petroleum Reserve (SPR). My view is that since it is an election season and gasoline prices have remained stubbornly high, the chance of a release from the SPR is high. Having a Democrat in the White House also increases the odds, as illustrated by this post.
If the Obama Administration orders a release, it would be the 2nd time the administration had tapped the SPR. In 2011 the Obama Administration ordered a release of 30 million barrels of oil in conjunction with a 30 million barrel release from other members of the International Energy Agency. At that time, oil prices were already well off their highs, and the impact was short-lived.
With the 2011 release, the price of West Texas Intermediate (WTI) dropped by 4% on the day the release was announced, but one week later the price was higher than it was before the release was announced. If you look at the data from the EIA, you can see the fleeting impact of that 30 million barrel release (the announcement was on June 23, 2011 when the price of WTI was $94.96). The price dipped, climbed back up, dipped again as summer driving season ended, but by year-end was back above $100/bbl.
I was strongly opposed to the recent decision to release oil from U.S. and international strategic petroleum reserves. I have covered the reasons for my opposition many times, but the single biggest reason I oppose these sorts of releases is that the fundamental reason for the existence of the Strategic Petroleum Reserve (SPR) is to provide insurance in case of a supply emergency. Politicians who use the reserve in an attempt to influence gas prices so they can enhance their chances of reelection should be thrown in jail if a national emergency does occur and we find ourselves with a depleted reserve. I have also pointed out the irony that politicians who are deeply concerned about climate change are leading… Continue»
While Robert continues his trip to Europe and across the Continental U.S., a significant piece of news has been dominating the headlines. Although we’ve been closely monitoring the release of 60 million barrels of crude on our Energy Ticker page, we also wanted to generate some discussion on the topic, here, on the R-Squared Energy Blog. Robert has, in the past, covered the topic of using the Strategic Petroleum Reserve as a weapon to control prices. In one article, he argued against politicians who were calling for a release, titling the essay: “Speculator’s Political Reserve?“. Robert also observed the Jekyll & Hyde phenomenon in “Contradicting Goals: Cheap Gas and Lower Carbon Emissions“. The topic was also covered in his “Debunking… Continue»
The following guest post is from OilPrice.com. (Readers know my feelings about using the Strategic Petroleum Reserve to fight high oil prices). ———————————— It’s Time for Obama to Spook the Oil Markets The fate of the Obama presidency hangs not on a birth certificate or the red ink on the federal budget but by the hose nozzle of your local gas station. Electoral discontent is measured by the price of a gallon of gasoline. Heading past $4 toward $5, that is a lethal trajectory for President Barack Obama. Enter the demagogues, especially the clown-in-a-business-suit, Donald Trump. Unfettered by the gravity that goes with facts, Trump says that he would fix the oil price – now around $110 a barrel –… Continue»
Strategic Petroleum Reserve or Speculator’s Political Reserve? In the previous essay, Senator Chuck Schumer (D-NY) was quoted in a letter to then-President Bush: “The [strategic] petroleum reserves are intended to provide relief at times when working families are struggling to make ends meet.” Politicians have a long history of requesting that the Strategic Petroleum Reserve (SPR) be utilized in an attempt to influence gasoline prices. But is that an appropriate usage of the SPR? The Purpose of the SPR Let’s review the purpose of the SPR. From the Department of Energy’s website on the SPR: In the event of an energy emergency, SPR oil would be distributed by competitive sale. The SPR has been used under these circumstances only twice… Continue»
The Phenomenon of Political Contradictions Energy policy frequently highlights some glaring contradictions among lawmakers. Some politicians who have railed against our dependence on petroleum and who insist we must reduce carbon emissions turn around and introduce legislation aimed at making gasoline cheaper. Imagine that an advocate for more exercise and better eating was also advocating cheaper fast food — and you have a situation akin to the mutually exclusive energy policies of some of our political leaders. Jekyll & Hyde I have never been able to reconcile what goes on inside the heads of Congressman Ed Markey (D-MA) or Senator Chuck Schumer (D-NY). Congressman Markey has long been a passionate advocate of legislation designed to reduce carbon emissions. Once, after… Continue»
This morning, I read an interesting editorial in the Wall Street Journal: Obama Has a Plan To Manage Our Oil Reserve The editorial was written by John Shages, a former deputy assistant secretary for petroleum reserves at the Department of Energy. The editorial essentially argues that the composition of the Strategic Petroleum Reserve (SPR) is lighter than the composition of oil that most refineries run. Since lighter crude is also more expensive than heavier crude, Shages is suggesting that we sell some of the light crude and buy back some of the heavy crude. His argument – echoing the argument from Obama and various other government officials – is that this would generate cash and help drive down oil prices…. Continue»
In response to Hurricane Gustav and the oil production that was taken offline as a result, the federal government announced that 250,000 barrels of oil would be released from the Strategic Petroleum Reserve: Oil prices drop as US opens reserve taps LONDON (AFP) – Oil prices fell on Wednesday as the US government decided to release crude stocks from its strategic reserve after Hurricane Gustav halted energy production in the Gulf of Mexico. “The release of the oil will prevent any shortage and that will, of course, help calm the market,” said Victor Shum, an analyst with energy consultancy Purvin and Gertz. The United States announced late on Tuesday that it was releasing 250,000 barrels of oil from its strategic… Continue»