THE US Strategic Petroleum Reserve (SPR) Thread (merged)

[Twilight]

The SPR is there to enable the government and military to respond to extraordinary circumstances that cause crude inputs to drop significantly below available refinery capacity. It is not held in trust for the American people, whatever they might think.

[GoghGoner]

extraordinary circumstances that cause crude inputs to drop significantly below available refinery capacity.

We are almost at MOL without any extraordinary events.

[GoghGoner]

For historical reference http://fossil.energy.gov/programs/reserves/spr/

On January 16, 1991, coinciding with the international effort to counter the Iraqi invasion of Kuwait, President George H.W. Bush ordered the first-ever emergency drawdown of the SPR. The Department of Energy immediately implemented a drawdown plan to sell 33.75 million barrels of crude oil, the United States' portion agreed to by the International Energy Agency.

The drawdown proceeded on schedule and without major complications. Between the initial authorization and the final sale, however, world oil supplies and prices stabilized, and the United States reduced the sales amount to 17.3 million barrels which were sold to 13 companies.

On September 2, 2005, in a coordinated action with the International Energy Agency, President George W. Bush issued a Finding of a Severe Energy Supply Interruption and directed the Secretary of Energy to draw down and sell crude oil from the SPR. Secretary Samuel W. Bodman immediately authorized a Notice of Sale for 30 million barrels of crude oil to the U.S. markets. The on-line sale was held from September 6-9, 2005. DOE evaluated each bid and determined that five companies had submitted acceptable offers for 11 million barrels.

[DrillBites]

Bunch of fat people sitting in a lifeboat.Big, fat people. There is a box of survival MRE packs in the middle of the lifeboad. They have been adrift for 20 minutes. "We should eat those MREs, I'm getting hungry."

+1. Nailed it.

+1 Nailed it clean. I really do not think that the SPR is going to be tapped until the level of production and imports is so low that the military and highest levels of government are threatened by the shortages. After rationing has failed, and whole areas are cut off from supply, then the SPR will be used to keep the government running, not the populace.

[TheDude]

extraordinary circumstances that cause crude inputs to drop significantly below available refinery capacity.

We are almost at MOL without any extraordinary events.

Dancing around the MOL has been quite commonplace in the last decade. Barring a major supplier suddenly going offline I don't see it happening for some time.

[GoghGoner]

Dancing around the MOL has been quite commonplace in the last decade. Barring a major supplier suddenly going offline I don't see it happening for some time.

Hmmm... by MOL I was referring to gasoline inventories, not crude. I didn't think there was an estimate for crude MOL. Anyway, the SPR was tapped after Katrina when crude inventories fell below 270 and gasoline below 195. Currently crude inventory is at 296 and gasoline at 203.

The weekly EIA report had demand up. Pup55 was speculating that this demand increase was due to gasoline under $4 a gallon. Well, the only way we are going to stay below $4 is if demand goes back down or supply increases. I don't think we will be staying below $4 because I don't think supply is going to increase. Once gasoline goes back up to $4 then the political pressure to open the SPR will be vigorously renewed. One little hurricane that bumps prices and the government will tap it -- lightly, but still tap it.

It's interesting that nobody else shares my opinion.

[Twilight]

The SPR is an awfully blunt instrument for dealing with spot shortages of just one product. It is much better to play distribution micromanagement in the Midwest, pay whatever price brings an increase in gasoline imports and let the consumer eat it. Just like last autumn.

Diesel is what you really do not want to run low. The US military, emergency services, agriculture, heavy goods transport, back-up generators and winter heating demand are what is critical. In a situation where those users face difficulty obtaining diesel and exports to Europe cannot be trimmed further, only then would it make sense to tap the SPR to deal with a single product shortage. I think we are some way off that kind of crisis.

My suggestion to US and Europe alike in the meantime: if you insist on a car, make sure it is fueled with whatever you export. That might see you through the first supply disruption.

[GoghGoner]

I was right and everyone else was wrong. You probably think that it is a bit premature but you would be wrong again

NEW Oil prices fell nearly $3 on
Thursday after the U.S. government and the International Energy
Agency pledged to release emergency stockpiles if Tropical
Storm Gustav disrupted U.S. oil production.

[ROCKMAN]

I'm with you troutman except for that designated fuelup day part. Back in the late 70's, when you were just a gleam in your daddy's eye, they tried the alternating day fill up scheme. Before you knew it there was a sudden and suspicious loss of gasoline inventory. Of course, everyone knew it was those nasty oil companies hiding it in tankers sailing in circles off shore. At least that was what the headlines said. Much later, they discovered where the gasoline disappeared to. Into everyone's gas tank. Instead of waiting till their tanks were near the bottom folks started to top off when they drop to 50% or so. When they ran the number of cars, etc it was spooky how close the calculation came. Oddly enough that news didn't make the front pages. Granted, after a few weeks the situation would normalize. But we don't need to fuel anymore conspiracy theories then we must.

But I would support a shoot-on-sight policy for anyone carrying a siphone hose.

[gt1370a]

If anybody comes across any news on SPR (oil, gasoline, etc.) releases in response to disruptions from Gustav, please post it here.

I suspect that Gustav will be like Katrina, that the DOE will respond with a generous release of SPR crude and strategic gasoline stockpiles, and that prices will continue their recent downward trend in response. I also think that this will lead to a great buying opporunity in something like UGA, the gasoline ETF. It would be interesting to hear what some smart people like pup or MrBill or Dantes think about that...

[TheDude]

Hi gt,

Here's something I posted in the storms/cyclones/hurricanes thread: Post.

[DantesPeak]

They already announced that they intend to release SPR and IEA stocks if needed, so I don't see why if they actually used the SPR prices would drop.

Keep in mind the US futures oil price is based upon delivery of oil to Cushing, OK, so if the oil doesn't get there we have a problem in Houston.

Then we have to consider that SPR oil is similar but not exactly the same quality as WTI crude.

[TreebeardsUncle]

Expect there will be a Gustave blip upwards in oil prices and then a continued slide downward over the next several weeks.
g

[frankthetank]

We need gasoline anyways... I don't think a shortage of oil is the problem... YET...

[GeneralGreen]

We need gasoline anyways... I don't think a shortage of oil is the problem... YET...

Yes the USA needs gasoline...Oil is not the problem..the problem will be refined gasoline...I imagine the EU will assist again the USA on this matter....I expect this to be on par with Rita 3 yrs ago....It will be a blow...but not as big as everyone is thinking.

[bratticus]

Oil prices drop as US opens reserve taps (link)
AFP Sep 3, 2008:
...The United States announced late on Tuesday that it was releasing 250,000 barrels of oil from its strategic reserve to help cover lost production...

[DantesPeak]

Oil prices drop as US opens reserve taps (link) AFP Sep 3, 2008:
...The United States announced late on Tuesday that it was releasing 250,000 barrels of oil from its strategic reserve to help cover lost production...

That request was withdrawn, but others are being considered.
See this thread.

[bratticus]

That request was withdrawn

Prove it. Just because the Citgo request was withdrawn doesn't mean that others were not granted.

[bratticus]

The AFP article states there was a release and there is no indication that Citgo or Marathon wanted it.

[eastbay]

Marathon's request for SPR oil was accepted.

The U.S. will grant Marathon Oil Corp.'s request for oil from the Strategic Petroleum Reserve, and expects more from other companies, Energy Secretary Samuel Bodman said.
"We are in discussions with Marathon Oil related to how much, related to where, and those conversations are ongoing,'' Bodman told reporters today after giving a speech in Washington.