Register

Peak Oil is You


Donate Bitcoins ;-) or Paypal :-)


Page added on July 25, 2015

Bookmark and Share

Congress Plans Sales From Strategic Petroleum Reserve

Congress Plans Sales From Strategic Petroleum Reserve thumbnail

Lawmakers are eyeing the Strategic Petroleum Reserve as a piggy bank, but not without controversy.

The Senate is considering legislation that would partly replenish the U.S. highway trust fund with $9 billion worth of sales from the reserve, which at 695.1 million barrels of oil is close to its 713.5-million-barrel capacity.

This month, the House passed a bill to sell 80 million barrels from the reserve to raise $7 billion to help pay for legislation to boost government drug approvals and research funding.

But proposals to tap the nation’s oil stockpile as a way to pay for unrelated government programs have drawn opposition. The Senate Energy Committee chairman, the U.S. energy secretary and oil industry analysts all criticize the move as shortsighted.

The sale of crude from the reserve is one of about 15 new funding sources that Senate leaders want to use to offset the cost of a $47.1 billion, multiyear reauthorization of the highway program.

The proposed sale of 101 million barrels from the stockpile, not slated to occur for several years, is expected to raise about $9 billion, making it one of the bill’s more significant revenue sources.

Other sources include measures to tighten compliance with current tax laws, as well as changes to government fee structures and a smattering of spending cuts. The highway bill was stalled temporarily, but advanced in a procedural vote late Wednesday.

The U.S. government created the reserve after the oil embargo the Organization of the Petroleum Exporting Countries imposed on the U.S. in 1973, which sent global oil prices and U.S. gasoline prices skyrocketing. The reserve’s purpose is to safeguard the U.S. against emergency supply disruptions like the OPEC embargo, according to the Energy Department, which manages numerous salt caverns along the Gulf Coast that hold the crude.

“The Strategic Petroleum Reserve is a vital national security asset that must be maintained in case of serious future supply disruptions,” said Sen. Lisa Murkowski (R., Alaska) on Tuesday. “While I recognize that a long-term highway bill is a priority, a shortsighted sale that undermines our emergency preparedness could have real and lasting impacts on our security. On the merits and in its timing, this is simply the wrong approach.”

Fueled by new drilling technologies such as hydraulic fracturing, U.S. oil production has increased 87% since 2007, to 9.7 million barrels a day in April. The new output has prompted some lawmakers, strapped for funding sources, to argue the government could reduce the reserve while maintaining enough oil to safeguard against an emergency. Congress authorized sales from the stockpile in 1996 and 1997 to pay for deficit reduction—the only occasions when it was tapped for reasons not set forth in the purpose of the reserve, according to the Energy Department.

The International Energy Agency, an energy watchdog of which the U.S. is a member, requires its members to hold at least 90 days’ worth of net petroleum imports. Right now, the reserve covers about 138 days, and commercial inventories alone fulfill the IEA requirement.

“It is unlikely that we are going to need the significant amount of SPR supply we have any time soon, and with the current oil boom, I am confident we can easily replenish the 101 million barrels that would be sold to pay for our roads and bridges,” said Senate Environment and Public Works Chairman James Inhofe (R., Okla.), one of the lead sponsors of the highway bill.

Energy Secretary Ernest Moniz told a House committee this month he has “some considerable concern” about using the stockpile “for anything other than energy security and resilience issues for which it was intended.”

Both bills would begin the sale of oil in 2018, when many analysts expect oil prices to be higher. Prices have dropped by half over the past year and are now hovering around $50 a barrel. U.S. oil fell to $49.19 a barrel Wednesday, down 52% from a year ago.

The Energy Information Administration in April estimated U.S. prices will average $76.65 a barrel in 2018. The Senate bill assumes an average price of $89 a barrel over eight years, while the House bill expects to sell oil for about $87.50 a barrel over the same period.

The Energy Department says it paid $29.70 a barrel on average for the oil currently in the reserve. Clearview Energy Partners LLC, a Washington, D.C., analysis firm, says that adjusting for inflation and for oil that was paid in lieu of royalties, the per-barrel value is $73.77.

Any sale from the reserves could weigh on oil prices, and the expectation of new barrels entering an already-oversupplied global market could send prices lower before any oil is sold, said Robert McNally, president of energy-advisory firm the Rapidan Group.

In response to the U.S. oil boom, the Energy Department is expected to issue a study in spring 2016 to determine whether the reserve should be reduced. Some market watchers say a supply interruption in the Middle East or elsewhere would still cause global oil prices to rise and push up U.S. pump prices.

“Once those barrels are sold for other programs, that money is lost to the strategic petroleum reserve,” said Larry Goldstein, a director of the Energy Policy Research Foundation, which receives funding from the oil industry. “This is an oily slope that is very dangerous.”

WSJ



14 Comments on "Congress Plans Sales From Strategic Petroleum Reserve"

  1. jjhman on Sat, 25th Jul 2015 11:50 am 

    How am I not suprised that an idiot like James Inhofe would decide to sell oil at the absolute bottom of the market to pay for something (hwy construction) that should absolutely be paid for by use taxes? This is the guy that called global warming the greatest hoax ever perpetrated.

  2. penury on Sat, 25th Jul 2015 11:54 am 

    As we approach the end times everything which can be converted to cash will be. The U.S. in concert with the ROW is bankrupt. Wars are expensive. The numbers of people living in poverty continues to expand, expenditures continue to increase, revenue continuously declines, declining energy is slowly gaining upon us.

  3. dave thompson on Sat, 25th Jul 2015 12:15 pm 

    HALLELUJAH We are saved!

  4. ghung on Sat, 25th Jul 2015 12:23 pm 

    KSA; world’s “swing producer”, borrowing $billions to placate the masses. USA; world’s “richest country”, selling its strategic reserves to fill pot holes. China, changing its “one child policy” to breed more consumers. Europe and Japan….. meh.

    Interesting times.

  5. ghung on Sat, 25th Jul 2015 12:26 pm 

    …. and I left out the part about Jimmy Inhofe being proof-positive that humans evolved fro…. er, are still dumb fucking apes.

  6. Speculawyer on Sat, 25th Jul 2015 2:00 pm 

    “How am I not suprised that an idiot like James Inhofe would decide to sell oil at the absolute bottom of the market to pay for something (hwy construction) that should absolutely be paid for by use taxes?”

    EXACTLY. Well, it shouldn’t be paid for by general taxes but by taxes on gasoline, diesel, and electric vehicle registrations. (i.e. have the drivers pay for the roads.)

  7. idontknowmyself on Sat, 25th Jul 2015 2:39 pm 

    As someone as already point out, we are not selling real wealth like oil for cash. So we are now using our last real wealth to keep business as usual running a little bit longer.

    The province of Ontario that is in big debt, wants to sell so of its electricity generation to private enterprise.

    Same thing, we are now selling real wealth for cash to keep BAU running.

  8. Makati1 on Sat, 25th Jul 2015 9:38 pm 

    No surprise. The Federal lands are next. When you are bankrupt and desperate, you will do anything to stay above water another day.

    I expect the Chinese to keep selling off their US paper as fast as they can until the USS America sinks under it’s sea of debt.

  9. Mike989 on Sun, 26th Jul 2015 9:41 am 

    Selling at a lose, typical dumb Republican idea.

    I want the smart Repubs from sheesh was it 40 years ago? Before Reagan the moron.

    RAISE the GAS TAX.
    PAY FOR YOUR WARS, with an OIL TAX.
    Then We Will NEVER Fight another oil war again.

  10. Bob Owens on Sun, 26th Jul 2015 3:08 pm 

    The SPR should only be used for EMERGENCIES! Like: A hurricane has destroyed New York City! Or: San Francisco has been destroyed by an Earthquake! Far more likely would be: A suitcase nuke has destroyed the oil terminals in Saudi Arabia! Anything less than something like these is just not an EMERGENCY!

  11. rockman on Sun, 26th Jul 2015 4:55 pm 

    First understand that the law covering the SPR isn’t some loose set of regs. It’s a very complex CONCRESSIONAL LAW that cannot be changed without the great majority of Congress, including the D’s, supporting it. And it wouldn’t be a simple as saying “let’s sell some oil.” There are very specific distribution, pricing and replacement requirements.

    And if I read correctly the sale, if it did actually come about, wouldn’t happen for years down the road. And lastly the amount of oil is insignificant in the global market place.

    Just more meaninless white noise from DC IMHO.

  12. Makati1 on Sun, 26th Jul 2015 8:15 pm 

    Rockman: And all of the things the emperor… er… prez did by Executive Orders were approved by Congress? What Congress? We have a bunch of corporate reps sitting in the chairs once occupied by Congressmen and women, nothing more.

  13. rockman on Mon, 27th Jul 2015 6:45 am 

    Mak – The SPR law specifically prevents the POTUS or even a simple majority of the Congress to change the rules. Granted it’s a very tedious read but the SPR law was designed clearly targeted to prevent such short term actions.

  14. Dredd on Mon, 27th Jul 2015 7:24 am 

    There is a poison salesman born manufactured every day (Poison Salesman Prosecuted)

Leave a Reply

Your email address will not be published. Required fields are marked *