Wednesday, July 28, 2010

Why should we stop shipping oil to the strategic oil reserve?

The democrats want to stop sending the 70000 barrels of oil per day to the strategic oil reserve, but we use about 21 million barrels per day... how would this have any impact on gas prices?Why should we stop shipping oil to the strategic oil reserve?
The amount in question seems to be key. Yes, its a drop in the bucket to consumption and allowing the 70,000 barrels (I read 60,000 in todays CSM) back into the market instead would probably not impact price enough to notice. One consideration is the price we are paying for that oil. If we think we are near the high for the year, why pay top dollar to fill the reserve instead of waiting until the price drops a bit?





The main purpose is to amass a large amount slowly, as in the 60,000 gallon a day strategy, and then use it in large quanities to prop up supplies during a disruption.





So if the reserves are running a bit low for that purpose, its probably more important to fill them up at whatever today's price is, to protects against large price swings if supplies are temporarily disrupted.





If someone disrupts supplies sufficiently, the price to refineries could spike dramatically and the impact could be severe, although presumably short lived.





So I favor making sure we have enough in reserve, and I'm not worried about the current cost of oil in the ranges its trading in today for that purpose. Its too risky to run low on reserves.Why should we stop shipping oil to the strategic oil reserve?
politics is more about symbols than real actions.
it would place a temp ceiling on rising oil prices.

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