What did BHO mean by ';We should sell 70 mil. barrels of Natl. Oil Reserve for less expensive crude?

He said this will make the price drop in 2 weeks. Can someone explain how selling 70 million barrels of our National Oil Reserve for less expensive crude lower oil prices?





I really don't know how this would work. I thought speculators, supply and demand, etc., raised and lowered prices. And what would we do with the 'less expensive crude'? It would cost more to refine? right? Will someone with knowledge of the oil business please explain.What did BHO mean by ';We should sell 70 mil. barrels of Natl. Oil Reserve for less expensive crude?
The problem is not and has not been the supply of crude oil, Two things have driven the price increase the weak dollar and, mainly, futures speculation. The speculators have already backed off which is the reason prices dropped as they have. Another factor is the lack of refining capability as environmental regulations have either halted construction of new ones in the US or made them extremely expensive, I do believe in safeguarding the environment but too many people use ';environmental'; issues to stop construction just because they don't want them built or built near them. We can take it out of the Reserve but we will have to replenish the Reserve later on so what price do we sell it out-the current price which would not help but pay for replenishment or the price we bought it at which means it costs the federal government millions of dollars to replace it at a higher price or just make something up in the middle? Futures specuators do not work for the oil companies they actually work against them; what is important to any company is profit margin and not dollar amount of profit. The ';excess'; profit of Exxon for the second quarter was a huge dollar figure but was a 8.4% profit margin because the price of crude was so high-the value of Exxon fell on the stock market because the percentage profit to sales was below what investors find good. Futures speculators are seperate companies or organizations and are not employees of the oil companies since the increase raw material costs does not help the profit margin of the oil companies and like now is more likely to hurt it. The SPR as of January was 707MM barrels but 424MM was sour and the rest 283MM was sweet so we are actually pulling roughly 25% of the easier and faster sweet out which is what we need in an emergency for a fast start. and at current rate of stockpiling to make that up, just to get back to 707MM, will be over three years unless we buy from the market at a higher price.What did BHO mean by ';We should sell 70 mil. barrels of Natl. Oil Reserve for less expensive crude?
By flooding the market with the additional sweet light crude oil, the price will drop. That's supply and demand. The govt. will eventually replace the light crude with cheaper heavy crude, which is cheaper because it's harder to refine, and therefore there's less demand for it. We have over 700 million barrels in reserve, so 70 million barrels won't deplete the reserve. That's just an oil company investor ranting.


Prices should come down temporarily, but once the 70 million barrels are gone, the price could begin to rise again. But it should be September by then when demand usually drops after summer, so the prices might stay down for a few more months.


It's a temporary relief measure. Democrats are also trying to pass a bill to limit the amount of money any one investor can invest in oil futures contracts. Oil companies spend billions on futures contracts to drive up the price. Hopefully, such a bill can be passed before prices are forced up again by the oil companies.
It would cause the market to flood with oil. More supply is available on the market so the price lowers. 2 weeks is a bit optimistic though. It might alleviate the price of oil by $.30 for about a week but nothing more. In the end it would do more harm than good as the national oil reserve would be severely depleted. The economics section would probably be able to give you a much more detailed answer than I can. Honestly, it would do more damage than good.
Everyday he comes up with a new solution that will not work. We do not want to use our reserves. he basically said he would use some of the light crude then replace it down the line with heavier crude which can be divesified into what ever type of gas they can get out of it.


He loves diversity and his big body guard.





Such a BUFFOON!!!!!!!!!
it wont.it's like his inflate your tires scam!
The oil from the SPR (Strategic Petroleum Reserve) resides here in the United States. If you literally withdraw barrels from the SPR, deliver and sell them to refineries, you are - barrel for barrel - replacing oil that doesn't need to be bought from the market (i.e. imported). The current drawdown rate we're capable of is 4.4 million barrels per day, and oil can reach the market about 13 days after the required presidential order.





A side benefit is how the average price of the oil in the SPR is $28 per barrel. Thus, when sold for say $100 to the market, the government (that's us) will make a steep profit on those sales. This is pure cash flow that can be used to help reduce deficit spending. Also, detractors might say, ';Yeah, but to replenish the reserve you'll have to pay the high price which means you'll lose in the end.'; This isn't true, because starting just several years ago, the SPR has grown in stock by receiving a cut of the oil barrels produced (called ';paid in kind';) from the land leases provided by the government, rather than the U.S. having to purchase oil to put in reserve. In other words, the SPR grows based on the inherent value draw out of government holdings.





So, you are correct that supply/demand sets the price, and the above is exactly how it would work (and has been done in the past).





As for the less expensive crude, I don't have a solid answer but I suppose we would keep it in reserve and only sell the sweet crude since that would diminish time-to-market. In a true national time of emergency that would warrant full replenishment of the entire SPR (a frightening scenario), the government would assume control of the domestic refineries anyway so our possession of sour crude in reserve isn't much of a problem.