Open the Strategic Oil Reserve!

[LadyTevar]

Friday March 14, 2008
Rockefeller wants to tap oil reserve
Senator believes that administration should stop buying crude while prices are skyrocketing

With skyrocketing crude oil and gasoline prices battering the economy, Sen. Jay Rockefeller is calling on the Bush administration to tap into the nation's 700-million barrel Strategic Petroleum Reserve.

The price of crude oil hovered around $110 Thursday. The average gas price in West Virginia was $3.39. Both were record highs.

"I support having the Strategic Petroleum Reserve, but I believe it's economically unwise to continue filling it when the price of oil is at record highs," Rockefeller said. "People are struggling right now to fill up their vehicles, and I don't believe the federal government should be taking oil supplies off the market.

"I have supported a temporary release of oil from the reserve to address supply, and we should keep that as an option, even if the amount released may be too small to bring prices down across the country."

The Strategic Petroleum Reserve was established in 1975 in response to the previous year's oil embargo, in which Arab countries cut off oil supplies to the United States.

President Gerald Ford declared a policy to build a reserve of up to 1 billion barrels of petroleum as an insurance policy for future supply cutoffs and severe disruptions in the oil market.

The oil is stored in caverns along the Gulf of Mexico.

President Bush has remained adamant on purchasing crude to fill up the reserve, which is nearing capacity.

A Senate bill introduced in February calls on Bush to temporarily halt the purchase of oil for the stockpile. Supporters of this approach say those purchases divert oil away from the marketplace, resulting in higher gasoline prices.

The proposed legislation, introduced by Sen. Jeff Bingaman, D-N.M., and Sen. Byron Dorgan, D-N.D., would require the U.S. to stop stockpiling oil until the price of oil reaches $50 a barrel. It hasn't been that low since June 2005.

Rockefeller noted that the high gas prices eventually affect the costs of other products, such as groceries.

"I've long believed that we should be focusing on the urgent need for a national energy policy that ends our dependence on foreign oil," the senator said. "But until then, we need to be looking at ways to help families with the rising cost of gasoline."

The debate over how to manage the oil reserve has always generated discussion among politicians and economists.

Stratford Douglas, associate professor of economics at West Virginia University, says tinkering with the reserve might have a short-term effect on oil prices, but he advises against the federal government interfering with the market.

"The markets correct themselves," Douglas said. "When politicians jump into markets and try to manipulate them, it makes economists nervous. In the long run, you're not going to fight the Saudis and OPEC."

With skyrocketing crude oil and gasoline prices battering the economy, Sen. Jay Rockefeller is calling on the Bush administration to tap into the nation's 700-million barrel Strategic Petroleum Reserve.

The price of crude oil hovered around $110 Thursday. The average gas price in West Virginia was $3.39. Both were record highs.

"I support having the Strategic Petroleum Reserve, but I believe it's economically unwise to continue filling it when the price of oil is at record highs," Rockefeller said. "People are struggling right now to fill up their vehicles, and I don't believe the federal government should be taking oil supplies off the market.

"I have supported a temporary release of oil from the reserve to address supply, and we should keep that as an option, even if the amount released may be too small to bring prices down across the country."

The Strategic Petroleum Reserve was established in 1975 in response to the previous year's oil embargo, in which Arab countries cut off oil supplies to the United States.

President Gerald Ford declared a policy to build a reserve of up to 1 billion barrels of petroleum as an insurance policy for future supply cutoffs and severe disruptions in the oil market.

The oil is stored in caverns along the Gulf of Mexico.

President Bush has remained adamant on purchasing crude to fill up the reserve, which is nearing capacity.

A Senate bill introduced in February calls on Bush to temporarily halt the purchase of oil for the stockpile. Supporters of this approach say those purchases divert oil away from the marketplace, resulting in higher gasoline prices.

The proposed legislation, introduced by Sen. Jeff Bingaman, D-N.M., and Sen. Byron Dorgan, D-N.D., would require the U.S. to stop stockpiling oil until the price of oil reaches $50 a barrel. It hasn't been that low since June 2005.

Rockefeller noted that the high gas prices eventually affect the costs of other products, such as groceries.

"I've long believed that we should be focusing on the urgent need for a national energy policy that ends our dependence on foreign oil," the senator said. "But until then, we need to be looking at ways to help families with the rising cost of gasoline."

The debate over how to manage the oil reserve has always generated discussion among politicians and economists.

Stratford Douglas, associate professor of economics at West Virginia University, says tinkering with the reserve might have a short-term effect on oil prices, but he advises against the federal government interfering with the market.

"The markets correct themselves," Douglas said. "When politicians jump into markets and try to manipulate them, it makes economists nervous. In the long run, you're not going to fight the Saudis and OPEC."

Douglas said it might be tough to justify taking oil from the reserve or suspending deposits into it because there is no crisis or emergency situation at-hand.

Even after halting deposits, it would take several days, perhaps weeks, to see gas prices drop at the pumps, Douglas said.

"It would take some time for it work its way through the gasoline retail market," he said. "That's not the fundamental issue or why we're paying over $3 a gallon. It's not because of the Strategic Petroleum Reserve."

Last month, the Department of Energy told Congress it had no plans to stop pumping 70,000 barrels of oil a day into the reserve. Energy department official Katharine Fredriksen said the amount of oil going into the reserve was less than one-tenth of 1 percent of the 85 million barrels of crude consumed daily around the globe.

"The modest fill rate does not put undue pressure on markets," she said. "It's a minimal amount of oil."

The last time the country halted stockpiling of the reserve was under the Clinton administration. In 1994, direct purchases of crude oil were suspended to offset the federal budget deficit. To also help with reducing the deficit, Clinton ordered the sale of 28 million barrels of oil in 1996 and 1997. In February 1999, crude oil purchases resumed for the reserve, which had dropped to 600 million barrels.

According to the Energy Policy and Conservation Act, only the president or the secretary of energy has authority to withdraw oil from the reserve. The oil released is then sold on the competitive market.

The president can order a full drawdown of the stockpile to counter a severe energy supply interruption or emergency, identified vaguely as an event causing a substantial drop in supply and a sharp cost increase of oil products.

A limited drawdown allows the country to release no more than 30 million barrels in a 60-day period, as long as there are 500 million barrels stored in the reserve.

The secretary of energy can also order a test sale, in which oil is pumped out of the reserve and distributed through the sales process as a routine test. This type of drawdown first occurred in 1985, when 1.1 million barrels were sold. No more than 5 million barrels can be made available during a test sale.

Only two emergency drawdowns have taken place over the reserve's 33-year existence. Following the Iraqi invasion of Kuwait in 1991, President George H.W. Bush ordered the sale of 21 million barrels of oil to offset disruptions in global oil supplies. The most recent drawdown came after Hurricane Katrina three years ago when 11 million barrels were sold to five companies. The hurricane had damaged production facilities, pipelines and refineries along the gulf.

Rockefeller isn't the only West Virginia congressional leader to call on the president to change his stance on the reserve.

Last November, Congresswoman Shelley Moore Capito, R-W.Va., and 24 other members of Congress sent a letter to Bush urging him to suspend shipments of oil to the reserve to free up supplies for the market. Around that time, the price of gasoline was about $3.17 a gallon in West Virginia.

The letter read, "Filling the SPR, without regard to crude oil prices and the availability of supplies, drives oil prices higher and ultimately hurts consumers."

Contact writer Jake Stump at jakest...@dailymail.com or 348-4842.

[Illuminatus Primus]

Wishful thinking. Is anyone party to this debate bothered to ask the opportunistic sponsors if they have any reason to believe that oil will go back down to $50/barrel?

[The Duchess of Zeon]

I cannot believe the Senate is going to be THIS fucking idiotic.

[LadyTevar]

What's idiotic about it, Duchess? The Oil Reserve is nearly at Capacity. We're buying up barrels at ungodly prices, preventing them from being refined and artifically tightening the supply, thus contributing to the higher prices.
Besides, isn't this the purpose of the Oil Reserve? To have a supply when its' tight so we -don't- have to pay high prices for gas and heating oil?

[J]

Except the supply isn't tight, the US is well above average in the gasoline stocks and around average for oil. Except for distillates (heating oil & diesel), inventories are building nicely right now so there isn't a supply shortage by any means. This is arguably the best time for building up the SPR.

[Edi]

What's idiotic about it, Duchess? The Oil Reserve is nearly at Capacity. We're buying up barrels at ungodly prices, preventing them from being refined and artifically tightening the supply, thus contributing to the higher prices.
Besides, isn't this the purpose of the Oil Reserve? To have a supply when its' tight so we -don't- have to pay high prices for gas and heating oil?

If your gas prices are at $3.39 a gallon, they are not high. They are certainly not going to get any lower and the American public had better get used to the idea that the only direction oil and gas price is going to move is upward, with maybe a few very small dips here and there in between bursts of a general rising trend.

[Mr Bean]

What's idiotic about it, Duchess? The Oil Reserve is nearly at Capacity. We're buying up barrels at ungodly prices, preventing them from being refined and artifically tightening the supply, thus contributing to the higher prices.
Besides, isn't this the purpose of the Oil Reserve? To have a supply when its' tight so we -don't- have to pay high prices for gas and heating oil?

Either Duchess is referring to the activity of stopping purchasing oil now(Which is rather silly) or the deadline that they not start rebuying oil until it hits 50 dollars a barrel again.

Both are moronic in their own right, we are not going to see 50$ a barrel oil again unless Oil shale gets off the ground in a HUGE way and the reserve is not yet full again.

[J]

Besides, isn't this the purpose of the Oil Reserve? To have a supply when its' tight so we -don't- have to pay high prices for gas and heating oil?

Back from lunch...

Anyway, the purpose of the SPR is to cover an actual shortage or emergency situation, for instance, the aftermath of hurricane Katrina where a significant portion of US oil production & infrastructure was wiped out. It's there to prevent actual shortages and help keep refineries, industry and gas stations from running dry.

The SPR is not a price control, nor should it be, though it has been used as one in the past. Think of it as the 5 gallon jug of gas you keep in the trunk of your car just in case, you don't use it unless you really have to. You shouldn't dip into it just because gas prices went up 10 cents, if you did, it won't be there to bail you out when you run out of gas 50 miles from the nearest gas station.

[Sidewinder]

These jackasses seem to forget the meaning of the word STRATEGIC. The oil is being reserved to prevent FAMINES, EPIDEMICS, and other DISASTERS caused by a SEVERE LACK of fuel for the transportation of goods and services-- the current situation of tighter budgets and thinner wallets is NOWHERE near the level of distress that would demand the release of the SPR.

[Master of Ossus]

These jackasses seem to forget the meaning of the word STRATEGIC. The oil is being reserved to prevent FAMINES, EPIDEMICS, and other DISASTERS caused by a SEVERE LACK of fuel for the transportation of goods and services-- the current situation of tighter budgets and thinner wallets is NOWHERE near the level of distress that would demand the release of the SPR.

Precisely. This is a strategic reserve meant to protect the country in the case of major disasters. It's not supposed to be used to stop peoples' whining about their pocketbooks.

[Stark]

Doesn't America still have the cheapest fuel in the western world, even though oil prices are way up and the dollar is falling?

I mean, $3.4 a gallon is way cheaper than fuel in AU (US$1.20 a litre average, or ~U$4.5 a gallon) or the EU, at very least.

[Adrian Laguna]

Doesn't America still have the cheapest fuel in the western world, even though oil prices are way up and the dollar is falling?

Cheapest fuel in the first world, maybe. Oil producing countries almost hand it out for free to their people, it's often cheaper to buy gas than bottled water. I think Venezuela still leads the pack in cheapest gas, at 15-20 cents of a USD a gallon.

[Ryan Thunder]

Doesn't America still have the cheapest fuel in the western world, even though oil prices are way up and the dollar is falling?

Cheapest fuel in the first world, maybe. Oil producing countries almost hand it out for free to their people, it's often cheaper to buy gas than bottled water. I think Venezuela still leads the pack in cheapest gas, at 15-20 cents of a USD a gallon.

Meanwhile we haven't seen prices anywhere near that low for 30-40 years. Good fucking grief.

[aerius]

Cheapest fuel in the first world, maybe. Oil producing countries almost hand it out for free to their people, it's often cheaper to buy gas than bottled water. I think Venezuela still leads the pack in cheapest gas, at 15-20 cents of a USD a gallon.

Even in Canada, gasoline is still cheaper than bottled water. Bottled water is around a buck a bottle for half a litre, gasoline is around $1.09 a litre right now. Of course that changes a bit if I buy a case of bottled water as gasoline doesn't come with volume discounts.

[The Duchess of Zeon]

What's idiotic about it, Duchess? The Oil Reserve is nearly at Capacity. We're buying up barrels at ungodly prices, preventing them from being refined and artifically tightening the supply, thus contributing to the higher prices.
Besides, isn't this the purpose of the Oil Reserve? To have a supply when its' tight so we -don't- have to pay high prices for gas and heating oil?

Because these prices will exist for all eternity, and continue to get worse, as has been discussed often on this board. The SPR is therefore to be built up to the very highest capacity (one of the view intelligent things the Bush administration has done) so that it will be there to operate extremely critical services like ambulances and fire engines when the oil crash happens.

In fifteen years, gasoline will be most likely at minimum going for $10 - 12 dollars a gallon. That's if we're lucky, as it preserves a marginal ability to operate automobiles. It will, with luck, stay like that for a decade or so--and then starting getting worse.

We should be increasing the size of the SPR as well as filling it to capacity. The SPR is there to keep this country running if there's no oil at all, until we can find backups. That's what we're headed toward, and since the world refuses to slow consumption, we need the absolutely biggest stockpile possible. We should start buying up all the old tankers in the world and moor them at Naval Inactive Reserve facilities filled to the brim with crude oil as a quick and dirty way to add SPR capacity.

[The Duchess of Zeon]

Incidentally, the use of heating oil should be banned--geothermal heat exchange sumps should be provided at government expense to everyone currently using heating oil, and the sale of heating oil should be made illegal. I mean, christ, we're running out of the stuff, and we're not just burning it to make our internal combustion machines go, but in simple furnaces to produce heat? That is really the sickest, and most perfectly avoidable, expenditure imaginable.

[phongn]

We should be increasing the size of the SPR as well as filling it to capacity. The SPR is there to keep this country running if there's no oil at all, until we can find backups. That's what we're headed toward, and since the world refuses to slow consumption, we need the absolutely biggest stockpile possible.

The DOE is currently planning on increasing the SPR to 1 bbl and President Bush proposed a "doubling" in capacity in 2007, which would bring us to ~1.4 bbl.

[aerius]

Speaking of heating oil, the theft of heating oil has gone up quite a bit in recent years. Heating oil and diesel are actually the exact same thing, except diesel gets hit with more taxes so it costs more and they dye them different colours. The prices are now high enough that siphoning heating oil from homes has become pretty lucrative, swipe a couple hundred gallons and that's a good $600-700 or so right there. Fill a couple 55 gallon drums and you can run a car for quite a few months.

[LadyTevar]

Incidentally, the use of heating oil should be banned--geothermal heat exchange sumps should be provided at government expense to everyone currently using heating oil, and the sale of heating oil should be made illegal. I mean, christ, we're running out of the stuff, and we're not just burning it to make our internal combustion machines go, but in simple furnaces to produce heat? That is really the sickest, and most perfectly avoidable, expenditure imaginable.

Forgive me if I'm wrong, but doesn't Geothermal need a rather active geology to work? West Virginia's not that active... Maine, which is having a severe shortage of heating oil, isn't either. How would you propose to use Geothermal in those two states?

[aerius]

Forgive me if I'm wrong, but doesn't Geothermal need a rather active geology to work? West Virginia's not that active... Maine, which is having a severe shortage of heating oil, isn't either. How would you propose to use Geothermal in those two states?

Heat pumps, not the geothermal generating stations you see in Iceland. 20-30' down, the ground is always at a more or less constant temperature, the heat pump is sort of like an air conditioner, except instead of dumping heat into the air it dumps the heat into the ground. During the winter it goes into reverse and pulls heat from the ground and moves it into the house. It takes electricity to run the thing, but in short, if you put say 1000W of electricity into it it can produce several times that amount of heat so it's a lot more efficient than an electric space heater. In the summer, works just like an air conditioner.

[The Duchess of Zeon]

Forgive me if I'm wrong, but doesn't Geothermal need a rather active geology to work? West Virginia's not that active... Maine, which is having a severe shortage of heating oil, isn't either. How would you propose to use Geothermal in those two states?

Heat pumps, not the geothermal generating stations you see in Iceland. 20-30' down, the ground is always at a more or less constant temperature, the heat pump is sort of like an air conditioner, except instead of dumping heat into the air it dumps the heat into the ground. During the winter it goes into reverse and pulls heat from the ground and moves it into the house. It takes electricity to run the thing, but in short, if you put say 1000W of electricity into it it can produce several times that amount of heat so it's a lot more efficient than an electric space heater. In the summer, works just like an air conditioner.

It can also replace your hot water heater.

[Vympel]

I always thought the Strategic Oil Reserve was to supply the military in wartime.

[His Divine Shadow]

Doesn't America still have the cheapest fuel in the western world, even though oil prices are way up and the dollar is falling?

Cheapest fuel in the first world, maybe. Oil producing countries almost hand it out for free to their people, it's often cheaper to buy gas than bottled water. I think Venezuela still leads the pack in cheapest gas, at 15-20 cents of a USD a gallon.

In egypt people filled up their tanks on 3 euros according to my parents. I just filled up my econobox and it cost me 60 euros.