Strategic Oil Reserves

[Annie]

http://lkmp.blogspot.com/2005/04/leave-spro-alone-for-now.html

4.6.2005
Leave SPRO Alone For Now
The Bush administration refuses to sell oil from the Strategic Petroleum Reserve Fund, and prefers to hoard these reserves for national security during wartime. Okay. Fine. But they face a pending decision to fill SPRO by another 27 million barrels, which would bring the reserve to 727 million.

Please don't do it. This is the wrong time. We're already in an oil bubble, despite the fact that inventories keep rising and year-to-date we have the biggest inventory build in the past 25 years, according to Bear Stearns. Rising prices and inventories don't make any real sense. More bubble evidence: from the lows, oil is up 220 percent. Compare that to gold, which is up 64 percent, or spot metals, up 117 percent. Oil is way out of line. It's an Internet-type speculative bubble. Mutual funds, hedge funds, and even insurance companies are buying oil on the momentum trade. This could be dangerous.

Goldman Sachs' $105 forecast is also right out of the Internet bubble period. This bubble will burst before long and prices will return to normal. But the White House could help by leaving SPRO alone for now. Their reserves are full up enough. Leave it be and let markets find a more normal oil price level. Motorists and the economy will benefit.
posted by Money Politic$ at 3:44 PM

 

[freeandfun1]

I have two theories about this....

1) Either the admin knows some serious shit is coming down the line and so they need to stock up (read an attack on Iran)

or

2) We are trying to get gas to stabilize at a higher price so that a) Americans get used to it so that b) We can drill for oil here in the USA and not rely on foreign supplies.

We still have a lot of oil here in the USA, but our wells must be drilled much deeper than in the ME where the average well is something like only 200' deep. In the US, we have lots of oil in places like Nevada, but the oil is up to 5,000' and more deep which means it costs, on average, about $50 a barrell to drill for it. When you can drill for oil in the ME for less than $12 a barrel (I am talking about the cost of drilling, not the cost it is sold at), it makes no sense to tap into our oil fields here.

 

[Annie]

I have two theories about this....

1) Either the admin knows some serious shit is coming down the line and so they need to stock up (read an attack on Iran)

or

2) We are trying to get gas to stabilize at a higher price so that a) Americans get used to it so that b) We can drill for oil here in the USA and not rely on foreign supplies.

We still have a lot of oil here in the USA, but our wells must be drilled much deeper than in the ME where the average well is something like only 200' deep. In the US, we have lots of oil in places like Nevada, but the oil is up to 5,000' and more deep which means it costs, on average, about $50 a barrell to drill for it. When you can drill for oil in the ME for less than $12 a barrel (I am talking about the cost of drilling, not the cost it is sold at), it makes no sense to tap into our oil fields here.

Except for this:

http://www.usmessageboard.com/forums/showthread.php?t=19534&highlight=barrel

 

[freeandfun1]

Except for this:

http://www.usmessageboard.com/forums/showthread.php?t=19534&highlight=barrel

Sorry, I am not following you on the "execpt for this" part.....

 

[Annie]

Sorry, I am not following you on the "execpt for this" part.....

Put that badly, rather the cost is now inline with R & D and tapping available reserves...

 

[freeandfun1]

Put that badly, rather the cost is now inline with R & D and tapping available reserves...

Exactly. That was my point. Now that we are getting used to higher prices, we can tap into our supplies here in the USA and the American people won't necessarily be as eager to return to cheaper oil since we are, frankly, getting used to the higher prices. If we release the strategic reserves, that will lower prices and then we will again clamour for cheaper oil.

I hope I am making sense.... I know what I am wanting to get across, just not sure if it is coming out the right way....

 

[Annie]

Exactly. That was my point. Now that we are getting used to higher prices, we can tap into our supplies here in the USA and the American people won't necessarily be as eager to return to cheaper oil since we are, frankly, getting used to the higher prices. If we release the strategic reserves, that will lower prices and then we will again clamour for cheaper oil.

I hope I am making sense.... I know what I am wanting to get across, just not sure if it is coming out the right way....

I hear you and I've been in favor of the development of alternative sources since the 70's. I'm not in favor of 2.39 per gallon, much less double that! :chains:

 

[Yurt]

I am not sure I agree with this "bubble" theory that likens oil prices to stock prices.

Stock prices were "pure" speculation based on potential, not P/E ratios. Yahoo once had a 400 P/E ratio (a good one should be around 12-15 or lower). Oil may be speculation about supply, however, this speculation is grounded in the fact that oil truly is a non renewable resource, unlike buying stock in Yahoo. I know the speculation that oil may run out in 20 years is only speculation, despite some scientific facts to back it up, however, it is not too much of a stretch of the imagine to see what will happen to oil reserves or oil in the ground or future oil (like ANWR) if say, China consumes per capita as much oil as the US. As you can imagine, oil demand would be extreme, thus driving prices higher.

I also read a recent story that oil demand is actually increasing. The article did not mention that this was regardless of the price of oil, but I wonder, if oil prices are so out of control, why is demand rising? Because, for now, oil is a one of a kind stock (commodity) that has a limited amount. It seems to me though, that the price of gas can only rise so high without having a major impact on the ecomony (shipping/trucks) and also people's driving driving habits (tourists). This is why I strongly support the research of alternative fuels/energy.

It is my personal opinion that even if Bush were to release some of the reserves, this would have little if any impact on the price of oil. The price of oil is concerned with future supply and demand. Therefore releasing some oil now will only, possibly, decrease prices for a very short time, if at all. Further supporting my belief is this:

The United States consumed an average of about 20.4 million bbl/d of oil during the first ten months of 2004, up from 20.0 million bbl/d in 2003. Of this, motor gasoline consumption was 9.0 million bbl/d (or 44% of the total), distillate fuel oil consumption was 4.1 million bbl/d (20%), jet fuel consumption was 1.6 million bbl/d (8%), and residual fuel oil consumption was 0.8 million bbl/d (4%)l.

Even if we released all the reserves, it would go very, very quickly.

Other interesting facts:

Petroleum Imports/Exports
The United States averaged total net oil (crude and products) imports of an estimated 11.8 million bbl/d during January-October 2004, representing around 58% of total U.S. oil demand. Crude oil imports from Persian Gulf sources averaged 2.4 million bbl/d during that period. Overall, the top suppliers of crude oil to the United States during January-October 2004 were Canada (1.6 million bbl/d), Mexico (1.6 million bbl/d), Saudi Arabia (1.5 million bbl/d), Venezuela (1.3 million bbl/d), and Nigeria (1.1 million bbl/d).

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