Report today suggests we may be close to another attack on our Strategic Petroleum Reserve
Calls for releasing petroleum from the US reserve are being raised across the globe. US oil not specified of course, but who else will open their taps? If we do this again, we will endanger future security for a simple 3 month reward – that probably won’t work.
Pablo Gorondi report, Oil prices slip amid calls for increased output, in the Bloomberg Business Week website today (2012-0829) states that suppliers countries are having a hard time meeting current demand and people seem to be running about screaming OMG, OMG we gotta do something! One thing to do might be to somehow force more oil from the sand-hogs who obviously want to keep their oil wells to themselves. Fine, if you really think the Saudi King is just being selfish. The other is to demand that the IEA “release oil from strategic oil reserves.” Wonder who those screaming people are?
Prices actually dropped a bit when investors thought that all those countries are going to pump oil from their strategic reserves and make things nice.
Our own work — We include links to our previous posts on availability of crude oil and on national strategic oil sequestrations. Find all posts on world petroleum reservoirs – click the INDEX button under our banner; check out Resources > Oil and Resources > Strategic Petroleum Reserve.
Saudi Arabia is having a hard time pumping even what it did 5 years ago, its current wells are running out of easily pumped crude and the new ones are difficult — Patterns in World Oil Production. Same comment can be made for nearly every one of our major world sources of crude petroleum. They are not sand-hogs, they are up against a wall. To afford to squeeze more out, the price of crude must rise. The data show it, so let’s assume, for at least a moment, that it is true.
The rise in oil prices as the demand starts back up is not the problem, it is the inconvenient timing of that rise, 3 months prior to a US presidential election.
The US has a huge strategic reserve. See our post Are Strategic Oil Reserves obsolete?, when the Obama administration began, it had been filled to 726 M bbl, same as 115 M m3. Perspective: this is a bit more than 10% of our annual usage. If we had an oil interdiction, our SPR would run needed power for about a month. That huge resource is really pretty small. It is ‘strategic’ because it was meant to allow us to survive the first several weeks of a surprise war; without it, we would be essentially … powerless.
This is so blindingly obvious, why worry? Ans: we drained petroleum from our reserve just last year, with only short term gains. Each injection from the US pool cause a drop in world oil costs, but the prices started rising afterwards. Net effects were measured in weeks not years. The reserve was filled with US$35/bbl and hit the market to drive prices back to $70/bbl, or thereabouts. We will never be able to fill the SPR with $35 oil again. Did someone get rich?
Drain America First
There is a legal requirement that must be satisfied before the President can open reserves. We outlined what it takes in our Drain America First. In 2011, a number of countries, some with reserves of their own, all agreed to do this. The catch here is that the US is the only one who provided actual fluid. All others provided ‘in kind’ support, as in providing tankers. Everyone else kept their reserves intact, only the US reduced its capability to deal with another Katrina problem, or a Fukushima-style nuclear disaster. (… or, reduced its ability to defend itself against aggression.) The DAFies won that one.
This is NOT a diatribe against an evil Barack Obama, I am certain that a Romney-Ryan regime would be worse. The R&Rs support the destruction of our manufacturing capability (this is what Mitt means by Job Creator), with its concomitant weakening of our strength overall. I may not understand why we would drain the SPR, but weakening our petroleum reserve would play right into the R&R agenda. Me? I think both BO and RR have heavy debt to the financial giants.
We can only stand back and watch this charade take place. If it happens, want to bet only the US’s oil is released? Within the next 2 months (Sept and Oct), we will probably loose another 30 or 40 M bbl as our part of an international ‘agreement.’
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Charles J. Armentrout, Ann Arbor
2012 Aug 29
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