SoylentNews is people
SoylentNews
from the that-worked-out-just-fine-for-the-helium-reserves dept.
President Donald Trump's proposal to sell half of the U.S. strategic oil reserve highlights a decline in the biggest oil user's reliance on imports - and a weaning off OPEC crude - as its domestic production soars.
The U.S. Strategic Petroleum Reserve (SPR) SPR-STK-T-EIA, the world's largest, holds about 688 million barrels of crude in heavily guarded underground caverns in Louisiana and Texas. Congress created it in 1975 after the Arab oil embargo caused fears of long-term spikes in motor fuel prices that would harm the U.S. economy.
The White House budget, delivered to Congress on Tuesday, proposes to start selling SPR oil in fiscal 2018, which begins on Oct. 1. Under the proposal, the sales would generate $500 million in the first year and gradually rise over the following years. A release of half the SPR over 10 years equals about 95,000 barrels per day (bpd), or 1 percent of current U.S. output.
Source: Reuters
(Score: 3, Insightful) by VLM on Wednesday May 24 2017, @08:01PM (9 children)
No one has much of an answer here other than WTF and symptoms of Trump Derangement Syndrome. I'll give it a try.
The purpose of a SPR or any SR is to remove supply as a military and diplomatic constraint. Setting up the SPR is actually a pretty good application of 1940s military thinking to 1970s production conditions. It really did make sense back in '75. We get our oil from the middle east (well, kinda) and between them and us is the USSR blue water navy ready to sink our oil tankers when the russkies start WWIII. From 1970 till 2000, our biggest enemy can fire some torpedos and our economy and military get torpedo'd.
So where are we now. Well, the USSR has been gone for a little while along with putting missiles in Cuba and commies in Nicaragua and all that. In fact the only commies left in the world are in academia and journalism. Saudi Arabia is on its last drips of oil, I read crazy shit thats usually officially denounced about +90% water cut and all that. Saudi is damn near out of recoverable oil and is ripe for revolution, like Iran 1970s style. We have a Crusades like invasion force in the middle east pretty much permanently, aint no arab nor russkie gonna stand between us and our oil in the middle east.
We don't need to protect ourselves from an expansionist global superpower because we're the last one out out there. We don't need a tool to convince "the enemy" its useless to block shipments from S.A. and other locations because the shipments are about to stop naturally from having pumped out what's economically viable, heck we're pumping non-economically viable stuff just to keep the charade up. We don't need a stockpile to last long enough for the Marines to storm the beach in the middle east because we stormed it in 2001-ish and we aren't leaving ever, at least as long as they have oil and/or Israel orders us to stay.
Its done. Its over. We don't need a strategic way to protect our oil tankers from USSR attack because there hasn't been a USSR in a long time and soon there will be no more oil tankers. We don't need a time reserve because we invaded like 15 years ago, we don't need months of supply to get ready to invade if its a supply side problem and soon there will be no supply side problem because we pumped out all their recoverable oil LOL.
Like most government programs I'm sure its full of "special people" who deserve lifelong employment with great bennies, you know, like we get in the private sector (LOL). And there's congressmen who will not be amused at jobs leaving their district and all that BS.
Drain the swamp, Trump. Flush it. Got a lot more to clean up. Getting rid of the SPR is a good deed. Go do some more good deeds. Build us a wall!
(Score: 2) by jcross on Wednesday May 24 2017, @09:03PM (3 children)
It seems like yet another factor they might be considering is how valuable that oil will actually be in 10 years time. Ten years ago when people were freaking about peak oil being upon us, it seemed like oil was likely to gain value, but now that it looks like electric vehicles are where we're headed, it makes a lot less sense to sit on an asset with falling value. Plus it probably costs a fair bit just to heavily guard it, as VLM points out. In an optimistic scenario, ten years from now it could seem as misguided as a Strategic Beanie Baby reserve, and if this wasn't happening there'd be some outcry about why it wasn't sold off back when the selling was good.
(Score: 2) by VLM on Wednesday May 24 2017, @09:29PM
I would imagine the beancounters have some complicated formula about net present value based on physical plant storage cost plus the costs of the employees, risk of price changes over time, predicted interest rates.
Also the cost of money to the government (weird sounding phrase, isn't it?) is non-trivial because an extra buck here and there is a permanent interest payment we won't have to pay forever. So in the long run we might save more money selling out now rather than later.
(Score: 3, Insightful) by richtopia on Wednesday May 24 2017, @10:42PM (1 child)
The current price is exactly what jumped to my mind with this announcement. Selling now seems like a poor business decision and would defeat purposes of the reserve. If we sit on the oil and sell when times are tough and oil is expensive, the additional oil in the market could help relieve consumers of price jumps and still produce larger total revenue for the government.
I also don't know how much it costs to keep oil in the ground. I would think that it would be free, given the oil started there in the first place, but there are probably some facility costs that could be saved by emptying facilities.
(Score: 0) by Anonymous Coward on Thursday May 25 2017, @11:37AM
Buy high, sell low. That's the business sense he brought to the Whitehouse. I seem to recall GW Bush built up the reserve when oil was at $150/barrel.
Plus Trump gets a +$500M in the WIN column to spend on holidays to Mar-a-logo.
(Score: 1, Insightful) by Anonymous Coward on Wednesday May 24 2017, @11:51PM
You are fighting the last war.
There is no telling where the next oil supply disruption will come from.
(Well except for the 'we ain't got no more' crisis, but even that could happen many different ways.)
The lesson of the 70's oil crisis was that lots of useful stuff depends on a supply of oil.
Renuable resources have changed and diminished this, but we still and will depend on a supply for a LONG time.
There will will be another crisis.
The reserve is a useful tool to help work through that.
OMB is correct that they don't see a reason to keep it.
Expected problems is not what it is for.
If you don't like this answer, then it is a good financial investment.
When we need it, the price of oil will be pretty good compared to fracking now.
(Score: 2) by JoeMerchant on Thursday May 25 2017, @02:20AM
And, keep Russia cozy because: China, India, North Korea, etc.
🌻🌻 [google.com]
(Score: 1) by khallow on Thursday May 25 2017, @05:23AM
(Score: 2) by hendrikboom on Thursday May 25 2017, @02:01PM (1 child)
Except perhaps the Global Strategic Maple Syrup Reserve.
(Score: 0) by Anonymous Coward on Thursday May 25 2017, @03:50PM
That's a sticky situation in itself.