The March 2nd, 2005 episode of Moral Politics aired some disturbing facts about the Bush Admininistration's SPR policies.
In 2001, following secret energy policy meetings, George Bush ordered the SPR to be filled to capacity. Over the last 3 years, the SPR has been filled with unprecedented speed to all-time inventory highs.
On March 9th 2005, the Whitehouse repeated they would NOT tap the strategic reserve and they made no indication that they were prepared to slow down the fill rate.
A quick look at history to understand how SPR policy affects oil prices.
On January 16, 1991, Bush Sr. tapped the SPR after Iraq invaded Kuwait. Oil prices fell by more than one third (>10$) in one day.
September 22, 2000, Clinton tapped the SPR after oil hit $37.80/barrel. (again because of Iraqi/Kuwaiti tension) Oil fell 5$ that day and fell $16 to $21.5 by Christmas.
November 6, 2001, oil traded below $20/barrel. 7 days later, Bush Jr. ordered the SPR to be filled to capacity. Within 6 months, oil prices were up more than $10 to nearly $30/barrel.
In 1991, during the Gulf War, Bush Sr. released 33 million barrels from SPR.
In 2004, during the current Gulf War, and amid all-time high oil prices, Bush Jr. added 40 million barrels to the SPR. It is not unreasonable to suggest that the all-time high oil prices were actually caused by the SPR buying.
How much is Bush’s SPR policy adding to the cost of crude oil?
Approximately $20/barrel of crude.
Crude prices are ~$10/barrel higher because the SPR is buying oil.
Crude prices would drop an additional ~$10 if the SPR were tapped.
What does it cost to fill SPR?
The government is paying record prices per barrel
The government has to pay holding costs to store each barrel
What is SPR costing you?
When oil prices go up, you have to pay more money for gasoline, utilities, and nearly every single product you buy.
What does $20 / barrel cost the American public
20$ * 20,000,000 barrels per day = $400 million per day
$12 billion per month
$144 billion per year
Where is $144 billion dollars going?
The extra money you pay for fuel goes to increased profits for the Texas oilmen who paid to elect your president.
These extraordinary profits are also going to Saudi Arabia, Venezuela, and Russia
Why are we still filling the SPR?
At 56$ / barrel just when does Bush think it would be ok to use the SPR?
Filling the SPR at these prices is a liability.
Note: the SPR is the biggest concentration of drilled petroleum. It is a terrorist target.
How much oil does the US have in reserve?
The SPR is just 1 element of petroleum reserves in this country. There are reserves held in many forms by private companies… (private companies hold reserves for the same reasons the government does: To protect companies from market price fluctuations, to keep expensive machinery from going idle, etc.)
A number of websites argue that the SPR is too small. They show data about how America only has 50 days of SPR import protection, etc. Perhaps these sites are simply misinformed, but they are certainly ignoring the total oil picture.
Total reserves of petroleum 1567 million barrels (2003 data)
Unrefined (or crude) reserves 906
Current SPR reserve 680 (2005)
SPR import protection 53 days (2005)
SPR and private import protection 150 days
How much import protection do we have?
SPR is only one piece of the oil picture. Over half (58%) of our oil imports come from non-opec countries. Canada and Mexico supply 30% of our imported oil. If Canada and Mexico withhold oil from the US, we've got bigger problems than oil to worry about.
It is ridiculous to assume 100% of US oil imports could ever be blocked. If so, we would have a much bigger problem than oil. Working with the numbers above let's find out what kind of import protection we really have.
(150 days) / (OPEC % of imports) = at least 357 days of OPEC import protection assuming someone could some how block 100% of OPEC oil from getting to the US.
(150 days) / (Persian Gulf % of imports) = 2 years of Persian Gulf import protection.
Why is the Government still filling the SPR?
Of raw crude, the SPR is about 71% of the “crude” reserve. Economists argue the current SPR buying is crowding out private reserves. As evidence, the SPR as a % has grown and private stocks are declining, even in absolute quantity. (refer back to link above)
Private crude reserves dropped from 312 to 268 in 2001-2003
SPR % has grown from 62% to 71% in that period.
SPR is getting greasier.
Just when it looked like oil prices were about to get relief from the SPR, the SPR grew another head. SPR was due to be full at 700 million barrels. The buying spree that is socking oil away in salt mines looked like it was finally going to end because the SPR was almost full. Oil prices could finally ease after the government quit buying all the excess supply.
SPR has now been authorized to grow to 1,000 million barrels. That’s 1 billion barrels!
Why is George Bush filling the Strategic Petroleum Reserves?
These reserves are supposed to protect the American people from excessive oil prices.
Instead, Bush appears to be creating strategic price protection for his Texas oil buddies.
He is simultaneously funding foreign oil economies that are notorious for funding terrorists.
Oil is oxygen for the American economy. We can’t live without it. The SPR is sucking the oxygen out of our economy.
Write to George Bush and your Congressmen and tell them you want the SPR buying to stop. Forward a link to this article.
Additional links to aid your own research:
http://www.energy.gov/engine/content.do?BT_CODE=PRICESTRENDS
http://www.eia.doe.gov/emeu/aer/petro.html