Revi wrote:Maybe... Buy high and sell low. I think it's not a great move.
It is the government. Since when is making a great move what they do?
Revi wrote:Maybe... Buy high and sell low. I think it's not a great move.
Revi wrote:Whatever your political persuasion, it seems like a bad decision to me to sell a real asset.
WASHINGTON D.C. (Bloomberg) -- The U.S. is poised to sell half of its emergency oil reserves to help pay its bills, something critics say defies the reason the stockpile was created decades ago as a hedge against supply disruptions.
The spending deal that passed both houses of Congress and was sent to the White House early Friday calls for selling 100 MMbbl from the Strategic Petroleum Reserve by 2027. Combined with other sales approved last year, that would mean the volume of oil in the reserve would fall by 45%, to about 303 MMbbl. The White House said President Donald Trump will sign the bill Friday morning.
"This is the biggest non-emergency sale in American history," said Kevin Book, managing director of ClearView Energy Partners in Washington. "This is nothing short of liquidation of a safety net."
At today’s oil price of about $60/bbl, a sale of 100 MMbbl would raise $6 billion. But it’s impossible to determine exactly how much money the government would raise with the proposed sales because oil prices fluctuate wildly and the budget plan calls for the sales to take place between now and the fiscal year that ends Sept. 30, 2027.
The stockpile is kept inside a network of underground caverns and storage tanks along the U.S. Gulf Coast and has a capacity of 700 MMbbl, making it the world’s largest supply of emergency crude oil. It was created in 1970s after the Arab oil embargo sent prices skyrocketing and forced Americans to ration gasoline, but has more recently become Congress’s go-to piggy bank, used to fund everything from roads to drugs to deficit reduction.
Past drawdowns approved by Congress have included 25 MMbbl to pay for a medical research bill in 2015 and 66 MMbbl to pay for transportation legislation in 2016. A draw down of 7 MMbbl, worth an estimated $600 million, helped pay for a package of tax cuts passed by Congress in December.
Emergency uses have included sales after Operation Desert Storm in 1991, Hurricane Katrina in 2005, and an oil-supply disruption in Libya in 2011. It was also tapped last year after Hurricane Harvey left refiners in Texas and Louisiana unable to secure crude. "This is a good example of why we need an SPR," Energy Secretary Rick Perry said at the time.
The last drawdown, a congressionally mandated sale in September 2017, fetched an average $47.45/bbl, while the one before that drew $53.88/bbl. Both sales yielded significantly more money than the government paid for the existing reserve oil, some of which is decades old. According to the Energy Department, the reserve’s inventory cost an average $29.70/bbl.
With the U.S. awash in crude oil produced at home, some in Washington have questioned its usefulness, including Trump, who proposed drawing down half of it in his budget request last year -- a move the White House estimated would raise nearly $17 billion dollars.
"A smaller SPR is projected to be able continue to meet international obligations and emergency needs," the White House said in its budget proposal.
The spending bill also reduces the reserve’s legal minimum inventory level to 350 MMbbl, from 450 MMbbl. Since Congress began selling off the reserve to fill budget holes in 2017, it has not authorized the Energy Department to replace any of the crude.
Energy Undersecretary Mark Menezes said in an interview Thursday that the reserve was not intended to be "a government ATM."
"My own view is that SPR was put in place as an energy security mechanism to ensure that we had supply," Menezes said.
He’s not alone.
"Selling the SPR to cover non-energy budget expenses is deeply short-sighted and unwise," said Bob McNally, president of consultant Rapidan Energy Group in Washington and a former senior energy official at the White House under Republican President George W. Bush. "In 1996 and 1997 we sold SPR barrels to pay for unrelated budget expenses and I was in the White House when we put those barrels back at higher prices starting about five years later, after 9/11."
The pending budget bill also authorizes $350 million in sales to help pay for efforts to modernize the stockpile itself -- a sign Congress doesn’t want to completely do away with the emergency oil supply.
"The SPR is only effective if it can get its petroleum to market quickly and efficiently in the event of a supply emergency," said Robbie Diamond, president of Securing America’s Future Energy, a group aiming to pare U.S. dependence on oil. "Geopolitical risk is alive and well in the oil market, and the SPR is America’s only formal short-term line of defense against oil supply disruptions and price spikes."
Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
I think Trump and Clinton share the same goal: a balanced budget.
ROCKMAN wrote:Ghung - "The self-proclaimed 'King of Debt" wants to balance the budget?" Does it really matter what the POTUS really wants? Last week the congressional R's and D's shit all over the budget they had been pissing on for the last 9 years. Do we need to remind folks that during President Obama's terms US debt about doubled from $10 trillion to almost $20 trillion. Who considers that running a balanced budget?
I laugh when the pendants say we just saw "bi-partnership". The R's and D's split the f*cking imaginary money pie. Like two bank robes splitting the loot. The only real winners are the "crooks". LOL.
ROCKMAN wrote:Ed - With respect to your 100 year metric consider that with the exception of war the US didn't start CONSISTANTLY running large deficits relative to GDP until recently. Perhaps your clock should start around 1980. And perhaps 100 years is a tad optimistic. Here's our deficit history from 1790 to 2015:
https://www.google.com/search?biw=850&b ... 8793248400
Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
Tanada wrote:The one recent time things seemed to go well was when we had President Clinton D and Newt Gingrich R working together to balance budget problems, but that only lasted about 5 years of the last 40.
Three firms that bought oil last year from U.S. emergency stockpiles raised concerns about dangerous levels of a poisonous chemical in the cargoes, according to internal Department of Energy emails and shipping documents reviewed by Reuters
The U.S. Department of Energy sold about 5.2 million barrels of oil from the Strategic Petroleum Reserve (SPR) to five companies including top refiners Valero Energy Corp and Phillips 66, according to a notice on Wednesday: * Phillips 66 was sold the most amount of oil - about 2.3 million barrels - and Valero Marketing and Supply Co was sold 900,000 barrels. * Other winners include commodities trader Trafigura AG, which was sold 1 million barrels, refiners Motiva Enterprises and Marathon Petroleum Corp which were sold 600,000 barrels and 400,000 barrels respectively. * The oil was sold at an average price of about $63 a barrel. * The Department of Energy said earlier in March it will sell 7 million barrels of sweet crude oil from the country’s petroleum reserve as it complies with a 2015 law to help fund the federal government.
Three companies that have purchased crude oil from the United States now claim the oil contained unusually high levels of poisonous chemicals, according to Reuters.
Internal Energy Department emails obtained by Reuters show that Royal Dutch Shell, the Australian bank Macquarie Group, and PetroChina International America (the U.S. trading arm of a Chinese state-owned energy firm) have all been dissatisfied with the quality of oil purchased from the U.S. Strategic Petroleum Reserve (SPR). Shell oil trader Steve Sellers wrote that his multinational company was "unpleasantly surprised” to discover high levels of hydrogen sulfide (HS2) in oil purchased from the SPR, the world's largest government reserve.
Initial tests run by Shell showed up fine, but further testing revealed H2S numbers running up to 600 parts per million (ppm), according to the Dutch-British company's emails to the department. OSHA says that levels that high could reduce a a grown adult to staggering and collapse within 5 minutes.
When a third party inspection group known as Inspectorate tested a sample from the SPR cargo purchased by the Australian Macquarie to be then sold to PetroChina, similar problems occurred. According to the Reuters-obtained documents, H2S levels of up to 9,000 parts per million (ppm) appeared. OSHA's warnings about H2S end at 2,000 ppm, where nearly instant death occurs. A terminal operator refused to allow workers to perform any additional tests out of concern about violating safety regulations.
In February of this year, a Congressional spending deal signed by President Trump declared that the United States would sell 100 million barrels of oil from the SPR by 2027. At the time, Kevin Book, managing director of ClearView Energy Partners in Washington told Bloomberg that "this is nothing short of liquidation of a safety net." But contamination in the U.S SPR could throw a wrench into the whole plan.
Problems with crude quality would make the U.S. Strategic Petroleum Reserve (SPR) less useful in an emergency because refiners would need to spend time and money removing contamination before producing fuel.
The Freeport facility is owned by Houston-based Enterprise Products Partners LP (EPD.N). Enterprise knew about higher levels of H2S in a small number of cargoes traded between private firms that passed through its terminal, Enterprise Senior Vice President Brent Secrest told Reuters in an interview.
https://www.reuters.com/article/us-usa- ... SKBN1H50GI
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