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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: 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.