If US SPR of 700million barrels at avg purchase cost of 40$/BBL can be sold at 75$/BBL,why not sell some now?

Question

SPR, Strategic Petroleum Reserve, was set up in 1974 and funded by federal government as an insurance policy for major supply interruptions like the Arab Oil Embargo of 1974. The oil was imported cargo by cargo & placed in storage in salt caverns & salt domes in Texas near many major refineries for a rainy day. The US Dept of Energy (DOE) under Sam Bodman operates it. Portions of the oil in storage could easily be drawn down now & sold into the oil market forcing the world prices of oil to drop to more reasonable prices, lowering the ridiculous geopolitical speculator-driven prices of gasoline & electricity we are paying. The generated revenues from the SPR oil could pay off some of the costs of having the US military in IRAQ & help New Orleans & the rest of the US Gulf Coast rebuild after being devastated by the Katrina& Rita Hurricanes in August 2005. Any SPR oil we draw down now, can be replaced later at lower costs when demand drops due to increased efficiencies & conservation.

Ken, I could say alot of things about your post which tell me you have some knowledge of the business but not enough to know what's what. For example, your explanation about why new refineries aren't being built in US is that they are capital intensive & their lead times are excessively long. That is all true, but the real reason you don't build them is that OPEC forces the oilco's to buy needed petroleum products from the refineries OPEC has built since 1974 making building refineries at home hard to economically justify. Point 2, you don't build a new refinery unless you have a secure supply of crudes to refine. In today's world, crude oil is sold under short-term contracts at prices that fluctuate with volatile spot prices always above the floor prices set by the oil cartel and their collaborators, the major oil companies with their own oil fields. And a 3rd point, I have seen no shortages of available supplies of crude because of rising Chinese & Indian oil demands.
TWH08162006

Answer 1

You have really research this question and I applaud you for your determination to inform the USA people of this plan - which by the way I had never heard of - so thanks!@

Answer 2

You have no idea why the oil is there. There is a lot more than that under the ground in the USA. There are several oil fields that are just sitting there waiting for the time it is needed. This is not the time to use it. We all know that oil is finite and will run out one day. That is one good reason to have it there. If there is a real crises in the middle east and they stop letting the USA have oil then that is a good reason for it being there. All the oil producing nations know the USA has this oil so it would be of little value for them to try and use oil shortages to make the States have a real problem. You may think Oil is at an extreem high price but in realaty it is not. It has been higher several times in the past. $15.00 a barrel in the 60s would be near what oil is bringing todaqy. That is how much the dolar has deflated over time. A time when earning $200.00 per month was considered a reasonable wage. I know because I have been around much longer than that. If you actually take the time to figure the percent of your income you pay for each item you buy you will find that it is very close to what it was 40 or more years ago. The USA has enjoyed very low oil prices for a long time since the crises in the 70s. Now that China and India are becoming major users of oil there is no choice left. The prices do have to go up and it probably is not over yet. I know you hear about the great sums of money that the oil companies are earning now. It is not as good as it looks. Refineries are the main reason for oil being short. There are not enough of them to keep up with the demand for their products. It takes five years at the least time and usualy longer to build a refinery and get it on line. They are needed and they are extreemly costly. Now the oil companies have the money to start building them. It has been a long time since a new refinery was built in the USA and some of the older ones are needing shut down. Things are not as simple as most seem to think they are. No using the oil to bring down the price of oil will not work because the demand world wide is very much too high. Honestly I wish it was that easy.

Answer 3

Because GWB will fill it back up at 150 BBL. GWB Gorge With Bliss.