Guest “thank you Mr. President” by David Middleton
MARKET PULSE
Trump says U.S. to buy oil to fill up the Strategic Petroleum Reserve
By Myra P. Saefong
Published: Mar 13, 2020President Donald Trump announced Friday that the U.S. will buy large quantities of oil to fill the country’s Strategic Petroleum Reserve. “We’re gonna fill it up. It’s a good time to fill it up,” Trump said at a press conference, during which he declared a national emergency to access additional aid to cope with the spread of COVID-19. As of March 6, the SPR held a total of 635 million barrels of crude oil. Its current storage capacity is 713.5 million barrels.
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Market Watch
I don’t know how quickly DOE will fill up the SPR. With about 78.5 million barrels (bbl) of available capacity, they could absorb 250,000 bbl/d of excess production for about 10 months. Russia and Saudi Arabia (mostly the Saudis) reportedly will be increasing production by about 3-3.5 million bbl/d. Totally offsetting that would fill the SPR in less than 1 month. This already appears to have had a stabilizing effect on prices.
The SPR can be drawndown at a maximum rate of 4.4 million bbl/d. The US currently imports close to 1 million bbl/d from Russia and Saudi Arabia. The US could consider suspending imports from OPEC+ (~2 million bbl/d), replacing it with domestic production and SPR releases. This would have a more significant effect on prices, allowing us to “hit back” a bit.
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If crude oil prices are down due (mostly) to low jet fuel demand during the corona virus scare, it’s a good idea to fill up the SPR with relatively cheap crude now, not only to prop up some frackers in the short term (until the corona virus scare blows over), but also to be prepared if some other crisis hits (if a hurricane wipes out production in the Gulf of Mexico this summer, or Iran blows up another Saudi oil field, and Europe needs extra oil).
In response to Drake’s comment about former President George W. Bush refilling the reserve at the start of his first term, that soon came in handy after the 9/11 attacks required the use of lots of oil to fuel the attacks on Al Qaeda’s training camps in Afghanistan.
Terrorism isn’t the major threat right now, but it’s prudent to build up the SPR in times of plenty (oil-wise) in case a lot of oil is needed in a hurry sometime in the future.
Where do I get extra tanks for my suburban farm (lot)?
The only good thing this virus has “caused” is Gasoline prices at or below $2/gal in many states:
https://www.gasbuddy.com/USA?__cf_chl_captcha_tk__=16bf853e101e7bb580fb4c850d9a5fb81ceb63bf-1584384880-0-AR05-yQuHXmZ27xSbo03EE1ud6g4jrBvNHSvZKsSSmB-_8fzV7e7fZguJitHnCTJsU5kf2ozIjeOGc_4mHsTgU-nV10NXok5O_2xXRuzBAhcZ26BNXwIIHWpee-dEEZbldOCJgB1kpL9W5QRTZnah45bNeioljEG1OZwCGH-CHiJ71kMtA7XKrBT1uXrw8badKEoug4X-JuvDrI1Ri3DwOeMMH8ATYMxID1dCBWxmryKSJkgbV7dyfiqfTbKvuoj5HlV3Sp_pM7g88wIeHRRocgvOF5HlnXJ8Kkb-pU_yj57VPcmv_LAEhGZPAm-59Q9I12VkdD_t9bQLoEtz29Uwd3gl430ZOqQizM7wf_oR-vH2GNGc4hx8yvgpkETvFgjU9GzhbIFvqiTUtTOZNaYm0s
JPP
My assessment is that under previous administrations the US domestic oil supply was tied up in regulatory knots. When a company is absolutely dependent on energy and there is the perception of a disruption the tolerance for trading a high price for certainty creates wide price fluctuations. One can know if the policies are good by the lack of
spectators. The price swings are the penalty for every on knowing the supply policies are lacking. I call it “the piss poor policy commodity price penalty.”
I think we need a tariff on imported oil equal to half the delta of $50 and the Brent price of oil per barrel. That would be about $10 right now, which would put domestic oil at around $40/bbl. That’s a bargain price: It was double that 5 years ago and has averaged about $58/bbl during the last five years.
We can’t let a crazy price war by OPEC and Russia destroy our domestic producers. Too much of a good thing is often a bad thing – I believe that includes too low a price for oil.
DonM- the best way to think of this is that we(US)can now supply LNG &oil & have a fall back! It’s now us! Why did most pol’its play the game of there is no more oil & gas. Climate change,this way they can put globalism,UN chart.& people that the Gov. Funds that are crony’s. How do you think that they stay in power. Drill baby drill was ripped apart by the Dim’s, S.Palin was 1000% correct to do it!