Strategic Petroleum Reserve

Bush diverting oil from reserve to pumps
President also orders investigations into whether industry is price gouging

AP/MSNBC:

Under pressure to do something about high gasoline prices, President Bush on Tuesday announced a series of measures, among them temporarily halting deposits to the nation’s strategic petroleum reserve to make more oil available for consumer needs.

In a speech on energy policies, the president added that he had ordered investigations into whether the price of gasoline has been illegally manipulated.

Pump the reserve to maximum capacity, then expand capacity and pump some more

Probably a good move regarding the reserve, which should ease supply issues a bit and (more importantly) calm folks down a half-notch or so. The noticeable effect at the pump won’t be much to speak of, but it might settle futures prices a bit. Murdoc hopes that it’s only a short temporary halt, though.

Note that this is simply a move to stop adding to the SPR, not a move to pull oil from the reserve. That, in Murdoc’s humble opinion, would be a big mistake. Releasing a bit from the reserves in times of true crisis, such as the aftermath of Hurricane Katrina, makes sense. Trying to manipulate prices with it does not. The time may come when that reserve is our military’s lifeline.

I’ve been warning folks for years (long before I started MO) that we need to pump the reserve to maximum capacity, then expand capacity and pump some more. It’s for national emergencies and, though current high prices are a severe discomfort for citizens and businesses alike, they do not constitute a national emergency. Things are happening or threatening to happen that could cause an oil emergency like we’ve never experienced. That’s what the SPR is for, and don’t tell me that filling it and expanding it even during a time of high prices is an accident.


And get a load of the photo on the MSNBC story:

ultragas.jpg

What is Ultra 93? Why do we need Ultra 93?

Four blends of gasoline is at least two blends too many.

First, MSNBC obviously chose this photo so they could show us $3.289 gasoline. But they don’t point out that the highest-priced blend is almost a quarter-dollar above the Premium blend. $3.059 gas, while not terribly cheap, isn’t nearly as alarming as $3.289 gas.

Second, the photo illustrates a not-insignificant part of the supply-demand issue which is, in turn, a not-insignificant part of the current prices. Four blends of gasoline is at least two blends too many. Then consider the fact that different regions have different rules and the three or four blends in New Jersey (the scene of the photo) are different than most, if not all, of the three or four blends in California, Texas, and North Dakota.

At least Iowa has the grace to make one of its three blends a significant ethanol variant.

Two blends in any region max. A total of six or seven blends total nation-wide. This isn’t freaking Starbucks we’re talking about. Unlimited options aren’t making things better.

Need more blends? Make them different flavors of alternatives to nearly 100% petroleum gasoline. The article states that Bush is going to try to ease environmental restrictions, but Murdoc’s not holding his breath.

Regarding the price gouging probe: Yeah. Right. We’ll all be getting a check back soon for overcharges.

Comments

  1. I don’t know about Ultra93 specifically, but cars with higher compression ratios (which typically means more power from a smaller capacity engine) need higher octane fuel. My old car takes 98 octane plus (which is readily available here) and noticably pings on low octane fuel. Newer cars with knock sensors will not have that problem, but they will lose power from lower octane fuel than they are designed for due to the spark retardation necessary to avoid knocking and such. Basically it’s for performance cars, or older cars. Many modern cars don’t require the higher octanes but will develop more maximum power with the more expensive fuel. I agree that four blends seems a bit silly. We have three primary ones here (91, 95 and 98 octane) along with Diesel and LPG. Some of the 95 and 98 octane fuels we have are achieved with additives such as Ethanol, others with traditional petroleum products. I don’t think it particularly matters what the fuel is made of so long as it has the right properties.

  2. your oil is too darn cheap’ my ass, Ian. There’s this thing called a ‘market’ we prefer to have the price set by. Right now that market, with all the bits & pieces added in, is around $70/barrel last I heard. So how is this ‘too darn cheap’? Big reason petroleum products are so damn expensive in most countries is taxes, and I find it interesting that so many politicians and others who for years wanted BIG taxes added to gas & diesel here are now screaming because the prices are where they wanted them. Only it’s the market setting the price instead of them taking bigger piles of money in the increased taxes, so all of a sudden ‘People are suffering!’. Like they wouldn’t have been suffering paying an extra $1 or $1.50 in taxes per gallon. Agreed, the reserve needs to be filled. And probably expanded.

  3. I don’t believe that we are going to run out of oil any time in the near future. However, two factors will conspire to keep gas prices relatively high – one, rapidly growing demand in India and China; two, more difficulty in pumping the oil that’s still in the ground. We’ve taken the low hanging fruit, oil wise. And China certainly is not going to change just to make our life easier. The one factor that might mitigate prices in the near term is additional capacity being brought on line now because it has become economically feasible to pump with higher oil prices. Our Isralian/Brasraeli friend is right to an extent – we have the technological base to (hopefully) move beyond oil dependency. Whatever the final form of that technology – superhybrids, fuel cells, better batteries (much better; lighter for one and fast recharge for another), or Mr. Fusion on the back of our DeLoreans – we need it. But high prices per barrel will likely suffice to spur that development without need for higher taxes. Higher taxes would just hurt the economy and make the transition harder for no purpose other than to fill the gubmint’s coffers. Unless you think that somehow, all the money raised on gas taxes will be pushed into development of new technologies.

  4. You are all still lucky by UK standards: here the eco-friendly types enable the government to add nasty taxes on top of the already expensive fuel price. Here we are about to pay –

  5. Yup, I hate taxes too, and down here people are even less competent at using them ( waaay more competent at stealing them ) than up there 😉 Sure, market prices should be the standard we live by, in a perfect world. Just bear in mind transition won-

  6. Wow, one pound per litre is a lot. We’re paying around AU$1.25 per litre at the moment, which is well under the equivalent of a pound. But that’s still about US$4/gallon.

  7. In Germany, we are paying 1.33 Euros per litre regular. That is 5.03 Euros per US gallon or 6.25 $. Diesel is somewhat cheaper. ian from Brazil may take note that despite our high taxes, real alternatives such as fuel cells are not on the horizon. And we had high fuel taxes before environmentalism became a religion. In fact, our greens are not really interested in cheaper alternatives. They are against the very idea of cars and roads as an embodiment of personal freedom. They will oppose biofuels or hydrogen as soon as it becomes a big industry. But they will spend billions in subsidies on windmills.

  8. I think Cindy Sheehan has her answer. Casey died to destabilize Iraq and the middle east generally so that oil prices can soar, putting huge, huge amounts of cash in the pockets of Bush family friends like the princes of the house of Saud. Soaring prices at the pump? these guys dont care. they just dont care. And all you Bush voters-you get to say your thanks at the gas pump! Here’s a DSCC link to: 10 reasons gas prices are all the Republicans fault: http://www.dscc.org/news/roundup/20060425_gas/ And here’s a link to a huffpo article discussing where the fault in the supply line thats spiking prices: http://www.huffingtonpost.com/raymond-j-learsy/oil-prices-being-pushed-e_b_18554.html

  9. Aaron, Never, ever use a link with ‘Huffington’ in it to prove a point unless it’s about stupidity.

  10. It’s everyone’s fault. The Dems don’t want oil drilling anywhere in the U.S. or our territorial waters. The Republicans can’t bring themselves to close the tax loopholes for SUV’s. So, we get no real energy policy in this country. Rather than create a real energy policy, our worthless politicians exacerbate the situation with counterproductive regulations like the ethanol requirements to reward their agro-lobbyist friends. The Wall St. Journal had a good example today: http://www.opinionjournal.com/editorial/feature.html?id=110008286

  11. Personally – anytime a politician starts yammering about ‘energy policy’ I instinctively clutch my wallet and vote whoever is opposing the yahoo. Most anytime you have plurality of politicians screaming that they need to do something – the best thing to do is nothing. (the alternative is for the politicians to create bills with names like ‘the pro motherhood and children fund’ to which the lobyists add every project they can dream of. With the end result being the bill does nothing for the problem it is supposed to address and the deficit goes sky high.) Energy plan? Some basics 1 – Prohibit vertical ownership of means/transport and distribution of gas, oil, and related fuels. (eg. Exon can drill for oil but it can t own gas stations) 2- All federal land to be used for the placement of refineries.(Get the states out of refinery permit process – basically the states just say no)Plus refinery capasity should be spread out so that no single event can wipe out our capasity. (Katrina?) 3. Create the American Century Prize – A billion dollar prize for the development of a 1) A fuel cell car that is competive with gas vehicals. or 2) A low cost (100$ a pound or less) means to move people and equipment into earth orbit. 4. Set manditory insulation requirements for all new houses and buildings. 5. Convert all public light sources to (street lights)to LED lights. 6. Prohibit the states from punishing home owners from installing home based power systems. (solar, geo-thermal) Examples: setting high ‘connection’ fee’s for self powered homes that connect to the grid. 7. Invade France – Has no bearing on energy policy, but my German blood screams that invading France is always a good thing to do. (Reduces stress)

  12. I forgot to add that lack of refinery capacity is a big problem, too. Behind that? Enviroweenies and politicians. I’d LOVE to have a serious alternate energy source. Problems: it needs to be comparable to the cost of oil products(preferably less), give at least as much energy per unit. And there’s nothing out there yet. And people have been working on it for about forty years now. For power plants we have nukes, but the politician/enviroweenie axis bleeds from the anus at the very mention of it. For the personal transport level? Not there yet.

  13. Bram: Here’s the Huffpo article- so you dont miss it: Oh its dated april 5, so its a little old by now. apologies for the legnth. Oil Prices Being Pushed Ever Higher By Manipulating Oil Futures Trading As readers of these blogs know, I don’t buy the oil patch pitch about skyrocketing oil prices being the result of ‘free market’ forces and nothing more. Rather, prices are being manipulated by OPEC with the help of the ‘oiligopoly’, the oil industry and its K Street hires who use their oil patch millions to propagandize and exert enormous influence on government (see ‘OPEC Agonistes,’ January 29). Now comes a series of seemingly unrelated events that reinforce this scenario. Scratch away all the economic babble and oil patch price propaganda, and you’ll likely find that the oil futures market itself is being manipulated to artificially raise prices. Consider this: ~ U.S. crude oil stocks last month, excluding the oil stored in the Strategic Petroleum Reserve, stood at 335,101,000 barrels, up more than 10 percent from the 302,629,000 barrels reported in March 2005. ~ Oil Movements, a consulting company based in Halifax, England, reports that OPEC shipments in the four weeks prior to March 25 fell 2 percent, to 24.8 million barrels (far below the vaunted 30 million barrels OPEC claims as its upper limit, a level its producers are forever ‘straining’ to reach). The drop in shipments was led by a decline in westbound loadings of almost 8 percent, far greater than any disruption related to Nigerian production problems, which were broadly blamed for earlier price jumps. ~ Ocean tanker rates are sinking fast as a result of new tanker capacity combined with a drop-off in oil loadings. The net result is lower oil shipping costs, which also point to an abundance of available supply and would ordinarily be reflected in lower prices. ~ The price of oil closed last week at over $66 per barrel, compared to around $55 per barrel a year earlier, when stocks were lower and ocean shipping costs were significantly higher. ~ On March 28, the Conference Board’s reading of U.S. consumer sentiment jumped to a near four-year high of 107.2 from the previous month’s 102.7. That very same day, the price of oil futures shot up by $2.18 per barrel, to $66/bbl plus, an unusually large one-day price move. So we know that the market was well supplied with oil stocks in March, OPEC had ample spare capacity, and delivery capabilities were not strained, as evidenced by the drop-off in shipping rates. Why then did an already high oil price take yet another jump on March 28, a gain it’s held onto since then at prices approaching Katrina levels? As I noted in my January 15 blog, ‘A Funny Thing Happened On the Way to The Gas Pump,’ the market price of oil is fixed in minute-by-minute trading of oil futures contracts on the floor of the New York Mercantile Exchange or its equivalents in London, Singapore, and elsewhere, and now in electronic trading as well. The trading is, for the most part, opaque, and the identity of those originating trades can easily be kept secret by using straw men or by operating through blind accounts. The anonymity lends itself to manipulation of the futures markets if someone has the means and the desire. And who might that someone be? Back on December 12, 2004, after a slight, and to then-OPEC president Ali al-Naimi of Saudi Arabia, inappropriate, fallback in prices, al-Naimi declared to the Arab News, for all to hear and read: ‘Watch what happens tomorrow. I tell you prices will go up tomorrow.’ And on the appointed day, after some unusual gyrations, prices did indeed go up. For al-Naimi to put his high-profile and carefully nurtured reputation on the line with such a prediction, he had to have known that either he or his agents at Saudi Aramco, or OPEC or its agents, stood ready to manipulate the oil market. Which begs the question, when before and since have OPEC and its agents tampered with the oil futures markets? How many times have the markets been manipulated and to what extent have oil prices been distorted? It’s only logical to conclude, based on events past and present, that the oil futures markets are being played with by an entity that commands the very considerable resources needed to distort a market of such vast dimensions. What else could explain last week’s puzzling price movements in which oil jumped some $5 a barrel during the course of the weeks trading, an increase, by the way, that totes up to about $150 million additional income per day for OPEC. Certainly OPEC, with the billions of dollars it has lifted from consumers’ pockets, has the resources to ante up for this cooked game. All that’s needed to make the scam work is an occasional news story or public relations cover to set off a finely orchestrated buying panic (see my March 2 blog, ‘Oil Price Panic Crescendo’). Civil strife in Nigeria, destroyed pipelines in Iraq, sabotage attempts in Saudi Arabia, hurricanes on the U.S. Gulf Coast, attacks on shipping lanes, Iranian bluster, and so on — all are good for a big fat price jump. And now the brazen ‘oiligopoly’ leaps to take advantage of a new dimension, the acquiescence of consumers! Given the ample and readily available supplies in place and the already dizzying price levels, what besides that day’s surprising jump in consumer confidence could explain the March 28 price spike? Those with their hands on the throttle of the market must have rejoiced to see a docile consuming public shrugging off the outrageous oil price levels as neither a determining nor detrimental factor in its perception of the economy. So, then, why not take the price to the next level? And, of course, our buddies at OPEC well know that a price spike like that of March 28 will bring the hedge funds piling in, causing prices to generate their own momentum. Were our government not so beholden to the oil patch, maybe, just maybe, someone at some level would pay attention. Too bad no one in the current administration will even raise an eyebrow.

  14. Here in Brazil we got an interesting program up and running: alcohol! A little background: In 1973, after the Yom Kippur war big oil scare, Brazil-

  15. Since we are posting some European fuel prices, here is where we are at today in Poland. I drive a diesel and if I filled up today, I would have paid PLN 3.99 per liter. Since the dollar continues to lose value that would have been $4.89 per gallon. Gas is more expensive, so it has to be over $5 now. That’s why people are driving smaller cars, diesels and cars with LP conversions here. (And filling up before we cross the border, if we are going to Germany.)

  16. This talk of ‘blame the dems’ or ’14 reasons it’s Bush’s fault’ is all stupid. Stupid. (And when you read Huffington enough to understand the shorthand of ‘Huffpo’, you’ve listened to WAY to much drivel already.) The situation is YOUR fault. (By which I mean all of us.) *WE* voted these folks (don’t for a second think that the dems don’t have their hand in this 50/50 over the last decades) into office, *WE* buy Chevy Suburbans as single occupancy commuter vehicles as we drive to work complaining about how much gas prices are affecting our pocketbooks. And we are *STILL* buying this crap. We are pathetic! Get over it, all of you, and accept your blame. No, I’m not happy about it either, but it’s rediculous to think that appart from a few folks gouging here and there, 99% of the ‘blame’ lies on the population of the US.

  17. No, we used to have a government that cared about keeping the price of oil stable. Now we have a government ‘led’ by Republicans whose favorite kind of corporate profits is windfall profits. Who gave tax breaks for buying hummers. Whose idea of CAFE (corporate average feul economy) is something you get out of a machine in the cafeteria. And they are led by oil men who’s best buddies are the Saudi royal family.Who destabilized the middle ease with a war of choice (and a mighty bad one). This is entirely the fault of the Republican leadership, and the voters who elected them. Dont blame me. I voted for Gore and I voted for kerry, and Im as convinced as ever that they would have been far superior choices. So yeah, its not the Democrats fault. And its something you should remind yourself every time you get gas.

  18. Aaron, explain again hen Clinton moved to have gas-guzzlin’ SUVs included in the standard passenger fleet numbers? We *ALL* knew he should have, he was asked to. He didn’t. At least Bush has done that. How many Democrats have fought as hard as they can to keep SUVs exempted from fuel and *especially* safety standards over the years? They thought it was more important to keep their campaign coffers full from the wealthy and powerful auto unions by keeping them in business at any cost. Only now is it starting to catch up with them. There’s a book out, ‘High and Mighty’. I suggest you read it before you claim that somehow democrats are not every bit as much the problem here. I’m going to take a guess that you feel you’re ‘part of the solution’. Your post shows that you are definitely part of the problem, and this problem needs to get FIXED.

  19. Republican desperation watch continues: KTLA now brings out the old saw: its Clinton’s fault. You forgot the Republican congress that he had to deal with, and this wasnt a priority issue. Of course the Democrats make and have made mistakes. Thats the nature of things. The difference is that while the Dems have made some mistakes, the Decepticons have completely screwed every single issue and opportunity as badly as it could be screwed. Of course that screw is relative: for Bush’s oil buddies, things are going just great. For you and me, we will feel it at the pumps. Now go to the gas pumps and feel free to tell the cashier that its my fault for the screwing your getting. And KTLA- here’s the problem: Unstable and unreasonably high oil prices. What is the cause of that problem: Destabilized middle east warmongering president opec production cutbacks oil speculators oil industry consolidation. Which of those are my fault? none. Which of those are Bush’s fault? some are bush’s fault flat out. (1&2) and the rest are ones that Bush should be dealing with. Competant managment would have kept prices on a slow climb up and likely would have stabilized prices at 30-40$ a barrel- based on their being new sources that could be brought online at those prices. Instead we have Bush Crisis Managment: They’ve done nothing, now its a crisis. Now comes the credibility related program activities. another round of ‘oh, nobody could have predicted…..’

  20. Your myopic view of the world may be amusing to yourself, but it doesn’t really address the issue. – Yes, it’s Clinton’s fault. What did he do about these issues in his first years which are supposed to be the most productive? He even had a democratic congress. Problem was, the dems don’t care about this issue any more than the republicans. – It’s Bush Sr.’s fault. I don’t recall him doing anything here, either. I don’t care that the congress was democratic. – Is it Reagan’s fault? Maybe, but I’d conceed that he had some far more serious issues to deal with. I’ll move on to the next target. – It’s the fault of the dems in congress during the Reagan years. What did they do? Meh, maybe no one at all cared back then, but I remember hearing about how oil in the future would skyrocket. – The dems in congress during the first Bush years are to blame. Did nothing except protect the status quo. Gotta keep those America SUVs guzzlin’ and subsidized! – Republicans during the Clinton years. Did no more than Clinton did. Good team in that sense. – Current republican congress and administration. Meh, same ol’ crap, excepting someone finally had the balls to stop exempting SUVs from fleet CAFE standards. And it *WASN’T* a democrat. However, he’s done so much other crap that’s unpleasant in these areas that I’m hardly going to applaud his efforts. OK, so, who’s to blame? Aaron, it’s you, me, all your buddies at work, everyone who votes with their ballots and their wallets. Only difference between you and me in this particular blame game is that I understand the problem quite a bit more than you seem to. Folks like you are what will guarantee the problem continues for years and years because it will always be someone else’s fault. Certainly not your’s. Grow up and take some responsibility for the last couple decades. Even if you’re too young to do that right now, there were plenty more folks exactly like you through all those years doing nothing in your place.