Posted On: Monday - October 30th 2023 9:55PM MST
In Topics: Trump Economics US Feral Government Inflation Dead/Ex- Presidents
Peak Stupidity got on this topic last week to note that President Bai Dien has imprudently sold off 45% of the crude oil in the SPR from the level that existed at end-o-Jan '21, when he took office. That brings it down to 48.5%, just under half of full capacity and 47.7% of its max.*
In case you want details, all the numbers are here, from the US Energy Information Administration** in tabular form to the nearest thousand barrels*** and a very nice interactive graph. Yeah, this is my kind of (small) government agency, if we're going to have any - just the facts with lots of numbers.
We then had something to say about President Trump's erroneous bloviating (to be generous) on the subject of SPR filling and depleting by Bai Dien and himself. In that post, I started getting into what I see in the bar chart below - keeping in mind that the President can indeed unilaterally deplete or fill the SPR. That was interesting, but I realized that it was neither the time nor post. This is.
It wouldn't make so much sense to focus on that chart without keeping this one in mind:
(I don't often get to the same site twice when I do internet searches, but I note that this graph must have been created by the same people who made the gasoline price chart I "borrowed" for Part 2 of Recent history of gasoline prices from 5 years back.)
The reader may also want to pull up a better and interactive graph like this one for recent (only goes back to '83) crude oil price history. Then we can refer to the very simple stuff in the Forbes article and some interesting political/law/economics in a much more comprehensive 12-page paper The Strategic Petroleum Reserve: History, Perspectives, and Issues by one Robert Bamberger of the Congressional Research Service. The latter provided lots of insight, but it is 14 years old. I can't say I read every word, but I skimmed through the latter and found what I was interested in.
Obviously, once the law had been passed in 1975 - signed by President Ford and then implemented in '78 - and the salt caverns were created at the SPR sites, they had to be filled up. This explains the 112 MMbbl pumped into the sites during the Carter Administration, and then the huge amount - 345 MMbbl - input by Ronald Reagan during his first term. He wasn't delinquent on this during his 2nd term either, with another 104 MMbbl. With only 14 MMbbl pumped in during G.H.W. Bush's term and a draw of 12 and 22 MMbbl during the 1st and 2nd Clinton terms respectively, there was not much change until G.W. Bush. 138 and 24 MMbbl were added to the SPR during his 1st and 2nd terms, respectively. There was no significant net change during Øb☭ma's 2 terms. As we noted previously, there was a net draw of 57 MMbbl during President Turmp's term. Then there was Bai Dien...
The filling up of the SPR was not just a matter of Presidents being prudent or not. If you recall, President G.H.W. Bush was genially mocked for his "Wouldn't be prudent..." line back in his day. He wasn't prudent in filling up the reserve, but, yeah, there's more to it.
For one thing there is the capacity. By some point, right there at the end of Reagan's Presidency, for example (at 78% full), one could fill the reserve somewhat higher but the change wouldn't be that significant in days of oil stored. Per the Bamberger paper, in '05 the US Congress required the SPR to be expanded to its authorized (when authorized, I don't know) 1 Billion bbl capacity per the Energy Policy Act. The money was allotted for a site in Richton, Mississippi. However, in '11, Congress voted to nix that insignificant amount of money... would be too prudent, got a Black! President who wants to make a splash and buy everyone a new phone and trash the old clunkers! Still, 1 Billion bbl wasn't that much more reserve. I'd have liked to have seen 5 Billion, a couple of years worth of oil... to get us through the SHTF? - nah, the Chinese would just buy it up.
More interesting are the changes in the price of crude oil as seen above. You want to buy when it's low, of course. The Reagan administration really wanted to fill this thing up, seeing as the steepest rise was in '81-82, when oil was still very high. They filled it up more through the middle of that decade though, as the nominal price eased down and the inflation-adjusted price even more so. (Inflation was still pretty high, as FED Chairman Volcker's high rates took a while to have an effect.)
The time to have bought was the whole decade and and a half from the mid-'80s through the end of the '90s. There was 100 MMbbl pumped into the SPR, but there was a remaining 100-125 MMbbl of capacity that was never attained in that particular cheap oil era. That would have been the time to increase capacity, but Congress didn't get to it until 2005. (As stated above, that never happened anyway.) I gotta give credit to Bush the Shrub then, for filling the rest of the SPR up, right near capacity, from '02 to '06, as crude oil prices were steadily rising. I suppose that rise was the impetus. During the cheap oil period, I suppose everyone thought it would stay that way and that the Strategic Petroleum Reserve is a "barbaric relic".
Well, two things just happened. This post ended up getting long enough with more discussion to come. That'll be more about the using, that is, draining, of the SPR, for appropriate and also political reasons. I'll refer to the very informative Bamberger paper.
The 2nd thing is that the nice EiA page I've been linking to - I mean, like just this afternoon - went away, as the EIA tells us they are revamping the site. All I have left for now is the screenshot graph shown in the 1st post on this subject, as I cannot find this page now. Damn government! (If anyone wants to try, start here, that is, if you see the "Petroleum Navigator" button. Sometimes, it's there.)
Lastly, while still on this post, let me give President Trump a little credit back after I eviscerated his BS previously. First off, I suppose one COULD SAY right now, the SPR is "mostly empty", technically, at 48% or so. Trump had said "It hasn’t been full for many decades. In fact, it’s been mostly empty.” Uh, no. We've got graphs and tables - the EIA worked for YOU, man! Less pedantically, though, I read in that Forbes article:
But then on March 19, 2020, President Trump directed the Department of Energy to fill the SPR to maximum capacity to help support domestic oil producers during the Covid-19 pandemic. Funding was blocked by Congress,...Of course, because PanicFest Infotainment and monthly impeachments. Too busy! As I discussed before, just a percent of that PanicFest "CARES ACT" money could have filled that thing up to a 6 1/2 month supply, were the capacity there, as opposed to the current capacity of 70 days and right now 1/2 that - 5 weeks worth. That was some good tactically thinking, but without strategic (get it?) thinking way ahead, well... Congress doesn't give a rat's ass about being prudent economically anyway - hasn't for arguably 2 decades.
* As we noted before, the reserve was up to a 725-726 MMbbl value during a 2 year maximum plateau from Summer of '09 to Summer of '11, which was ~ 11-12 MMbbl above the stated capacity from the Dept. of Energy site.
** See now, I gotta admit, an agency that collects and disseminates this kind of information is one of the few I wouldn't be all for eliminating, were I a Founding Father 2.0. Yes, it could be done privately, though. Of course, they've got the usual diversity shown on their "About" page. I'd never heard of these people before, but, then again, the Regime Capital is a big place.
*** Again, in the oil/economics world, a barrel (42 US Gallons) is written as a "bbl", and a million barrels as "MMbbl".
**** These numbers may not quite match the Forbes graph bars, but I trust the EIA tabular data more.
Comments:
The Alarmist
Tuesday - October 31st 2023 11:25AM MST
PS
Funny how the Biden Regime drains the SPR BEFORE sabre rattling in the Middle East. You’d be forgiven for thinking the goal is to bankrupt and destroy the USA.
Funny how the Biden Regime drains the SPR BEFORE sabre rattling in the Middle East. You’d be forgiven for thinking the goal is to bankrupt and destroy the USA.
Moderator
Tuesday - October 31st 2023 7:32AM MST
PS: M, that is a good question. It may have been addressed to some degree in that Bamberger 12-page paper I linked to, but again, I skimmed it. American oil consumption has increased over the years, but the general range is 10 - 20 million barrels per day. (I just looked for a decent chart - having a time getting a good one, and I SURE hope it doesn't go away!) We can multiply, but I saw a yearly figure that shows about 6 Billion barrels of crude consumed yearly.
We can compare that to storage or just compare an ~10-15 day (out of that 70-90 day supply) supply to well, 365 days. 10-15 out of 365 may be significant with a commodity like this. I don't know the ins and out of the business at all. However, that 365 days is of American consumption. I think compared to the world supply, the amount bought, even during Reagan's big fill in the early portion of the '80s would not effect the markets too much.
However, if filling it doesn't, why would draining it? I'd say the draining is meant to be over a short time-span and in a very tight supply market. It's not supposed to be about lowering the price, and that is what that paper explains and the next post is to be partially about. (I will have to skim over it again to find the interesting political parts.
We can compare that to storage or just compare an ~10-15 day (out of that 70-90 day supply) supply to well, 365 days. 10-15 out of 365 may be significant with a commodity like this. I don't know the ins and out of the business at all. However, that 365 days is of American consumption. I think compared to the world supply, the amount bought, even during Reagan's big fill in the early portion of the '80s would not effect the markets too much.
However, if filling it doesn't, why would draining it? I'd say the draining is meant to be over a short time-span and in a very tight supply market. It's not supposed to be about lowering the price, and that is what that paper explains and the next post is to be partially about. (I will have to skim over it again to find the interesting political parts.
M
Tuesday - October 31st 2023 4:58AM MST
PS
I wonder how much filling the SPR would affect oil prices, as in there's extra demand. Is part of the 1981-82 high prices because they were filling it?
I wonder how much filling the SPR would affect oil prices, as in there's extra demand. Is part of the 1981-82 high prices because they were filling it?
I don't think the SPR is really designed to smooth the consumer price of oil. As you say, it's not a huge percentage of world consumption.
I can think of two uses for it:
1. If you get threatened by a oil cutoff, release it for domestic consumption. This would require some legal fiddling so it isn't just sold elsewhere.
2. Reserve it for military use during a war.
Has the drawdown actually affected the price? I can't tell, taxes mean the price of stuff I use doesn't correlate with crude oil prices in any meaningful way.