Posted On: Tuesday - October 31st 2023 8:10PM MST
In Topics: Economics US Feral Government Inflation Dead/Ex- Presidents
Continued from the previous posts: The Strategic Petroleum Reserve and the Bai Dien Drawdown - - Donald Trump: BS ass-ymptotially approaching Lying and Presidents and the Strategic Petroleum Reserve: Capacity, Filling, and Crude Prices. This ought to be the last of it, since it's getting boring at this point. If it's getting boring to the writer, imagine the situation of the poor readers! [And commenters! - Ed.]
It's a little wonky, but an August '09 paper written by one Robert Bamberger, The Strategic Petroleum Reserve: History, Perspectives, and Issues, for the Congressional Research Office does a good job in explaining a bit of history and what's been going on with the SPR...till 14 years ago, of course. The impetus for this idea was the '73-'74 Arab/OPEC oil embargo that resulted in what Americans figured was the near end of oil. In reality, it was just the end of really cheap oil. The rough times at the gas stations and the shock of it had the US Gov't figuring out a way to stock oil to cushion shocks via a big storage facility.
We discussed the filling of the SPR salt caverns, and which President* did the most and least of it, in the last post. Let's discuss the depleting, draining, or drawing down. Per the act that created the reserves:
The Energy Policy and Conservation Act (EPCA, P.L. 94-163) authorized drawdown of the Reserve upon a finding by the President that there is a “severe energy supply interruption.” This was deemed by the statute to exist if three conditions were joined: If “(a) an emergency situation exists and there is a significant reduction in supply which is of significant scope and duration; (b) a severe increase in the price of petroleum products has resulted from such emergency situation; and (c) such price increase is likely to cause a major adverse impact on the national economy.”This power was to be exercised via Congressional authority, yet, since 1990
This section, 42 U.S.C. § 6241(h), has allowed the President to use the SPR for a short period without having to declare the existence of a “severe energy supply interruption” or the need to meet obligations of the United States under the international energy program.Yep, there's that loophole. By the time Mr. Bamberger wrote his paper,
Legislation has been reported in the Senate that would alter significantly the authorities governing drawdown and sale from the SPR. The American Clean Energy Leadership Act of 2009 (S. 1462) would require that the SPR include 30 million barrels of refined product (distinct from the 2 million barrels of home heating oil held in the Northeast Heating Oil Reserve); would transfer authority for a drawdown from the President to the Secretary of Energy; and would amend the drawdown authority to permit drawdown and sale in the event of a “severe energy market supply interruption” that has caused, or is expected to cause “a severe increase” in prices. This language is a significant departure from existing authorities which predicate drawdown disruptions in supply, and discourages use of the SPR to address high prices, per se.Yep, "leadership", by the President, and now drawdowns could have a basis on oil prices, well, there are these elections every 4 years ...
The writer has 4 pages that discuss the various small drawdowns of the SPR, along with the change in reasoning. There was the Gulf War I drawdown in early '91, based on expected disruption of supply and price increases that didn't much pan out. Then, Bill Clinton proposed in '96 the withdrawal of a small amount, 7 MMbbl, to pay for, well, the work on the SPR. (Wait, whaaa? Forget it, readers, it was ClintonTown.) Mr. Bamberger does not mention the small but sharp drop of 30 MMbbl in the Fall of '00. Then, the disruptions due to refinery damage from the hurricane that hit the Gulf coast in the mid-'00s are discussed. However, along that decently increasing reserve level of the early 00's, there was just a blip down of ~15 MMbbl in the Fall of '05, with the reserve still at 90-95% capacity. That was in the aftermath of Hurricanes Katrina in August and then Rita in September of that year (not a good time to have had a beach house down there).
The discussion of the depletion of some SPR crude in the Summer of '08 was a different story. In this case ...
The rise in crude prices to over $140/barrel by the summer of 2008 was attributable to many contributing factors, including increasing international demand, and concern that demand for crude might outstrip world production. Markets were described as “tight,” meaning that there might be little cushion in terms of spare production capacity to replace any crude lost to the market, or to provide adequate supply of petroleum products.
Significant and sustained increases in oil prices were observed in the absence of the sort of “severe energy supply interruption” that remains the basis for use of the SPR. As has been noted, legislation in the Senate (S. 1462) would introduce a price basis for authorizing a drawdown of the SPR.In answer to the question posed by commenter M under the last post:
Some policymakers were urging the Administration to release oil from the SPR during the spring and summer of 2008. A review of the dynamics in the oil market during this period provides a demonstration of why an SPR release in the face of high prices will not necessarily foster a decline in petroleum prices.If the Peak Stupidity reader is still interested, he can go to that short paper and learn quite a bit about the intended use of the SPR by the Feral Government and how it was actually used. Since its author Robert Bamberger hasn't covered the last 14 years, it is up to us to see that the massive drawdown of the crude oil reserves by Zhou Bai Dien was, and still is, an attempt, at least to keep gasoline prices down in order for the American voter to not see what a shambles the economy is. That is, it's an attempt to hide at least one portion of the reincarnated Misery Index (any 1970's aficionados here?), inflation.
Could this depletion of so far 1/4 Billion barrels of oil from the SPR help keep gas at the pump prices low until, say one year and 5 days from now? There's a lot more to this than we can cover here. There's global supply and global consumption, along with how much we produce here (not all of it stays here) to think about. However, let's just note that this 1/4 Billion bbl was about 12 days worth of these 2 years at our consumption rate of ~20 MMbbl/day. That's just a couple of percent, but maybe releasing it strategically can keep prices where they want them, which is NOT the purpose of the Strategic Petroleum Reserve.
One final note: I noted in the last post that the SPR has had authorization to expand to 1 Billion bbl capacity, though the money for that has been long thrown to the winds. In this paper, I read that G.W. Bush pushed for a further capacity increase to 1.5 Billion bbl, but his effort was unsuccessful. No, there are not many preppers in the Feral Government.
PS: Yea! The EIA page with all the SPR level numbers and the interactive graph is back up! (Do they read Peak Stupidity?)
Comments:
Moderator
Wednesday - November 1st 2023 5:51AM MST
PS: "Expansion of the SPR will happen about the same time as the electrical grid is made more resilient." Yeah, and the more incompetent this nation becomes, the less chance it even CAN happen, even with a Prepper in the White House. (Who that'd be, I got no idea.)
M
Wednesday - November 1st 2023 3:22AM MST
PS
Figures. The authority gets pushed down from Congress, i.e. the people, to the President, to the Secretary of Energy. The next step will be to an agency, i.e. the bureaucracy. This is certain to make it less political.
No, drawdown can't affect prices, unless you dumped the whole amount all at once - and then it would be very short term. But it sure looks good to be "doing something" about it.
Expansion of the SPR will happen about the same time as the electrical grid is made more resilient.
Figures. The authority gets pushed down from Congress, i.e. the people, to the President, to the Secretary of Energy. The next step will be to an agency, i.e. the bureaucracy. This is certain to make it less political.
No, drawdown can't affect prices, unless you dumped the whole amount all at once - and then it would be very short term. But it sure looks good to be "doing something" about it.
Expansion of the SPR will happen about the same time as the electrical grid is made more resilient.
For that matter, making the grid more resilient is generally good.
But a lot of the problems we've had are not due to inherent fragility. They are due to dumping more and more unreliable energy into it. Which it was not designed to use. Meanwhile, *not* putting any effort into redesigning things, and in fact using any money we could use for that to subsidize the unreliables.
So we get more unreliable energy. As the man said:
"I like money."
"I like money too! What are the chances?"
If they're giving away money for doing something, why not do it?
So we're doing all the wrong things, and none of the right things.