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by thelamest
1366 days ago
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This is just not true. In the act that established SPR (https://www.govinfo.gov/content/pkg/COMPS-845/uslm/COMPS-845...) there’s much about supply, little about national security, and next to nothing about military: Sec 151(b)
[The purpose of creating the Strategic Petroleum Reserve is] to reduce the impact of disruptions in supplies of petroleum products, to carry out obligations of the United States under the international energy program, and for other purposes as provided for in this Act. Sec 161(d)(2) [Secretary of Energy may authorize a drawdown when]
(A) an emergency situation exists and there is a significant reduction in supply which is of significant scope and duration;
(B) a severe increase in the price of petroleum products has resulted from such emergency situation; and
(C) such price increase is likely to cause a major adverse impact on the national economy. Sec 161(h)(1) [POTUS can authorize drawdowns if]
(D) the Secretary of Defense has found that action taken under this subsection will not impair national security, |
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At that point it was less a question of price than physical availability. Scarcity causes price shocks... but also simply inability to obtain oil at any price.
That lack of access creates emergency scenarios, which creates motivational fear, which is the political/strategic power the embargo had.
By creating a credibly large stockpile, the US mitigated the emotional (i.e. emergency lack of access) implications of an embargo, which mitigated the strategic effect of the embargo (no fearful, rioting populace, less political pressure), as regardless of price rises the US would have access to oil.
So that's why it was created.
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Unfortunately, or fortunately, a credibly-large stockpile also begs the question: why not use its existence during non-embargo times to trade some of its inventory?
By definition, you're a seller of last resort and huge volume, so you can always find buyers.
And if you expect the price to randomly oscillate, you can sacrifice some temporary amount for a decent profit, refilling when you can. Because remember, you don't actually need the resource unless there's a breakdown in oil markets (e.g. supply disruption or embargo). Any oil sitting in the SPR isn't making you money.
The risk scenario for the trading option is: you lessen your available volume too low (in comparison to US consumption/production) and oil producers uses the opportunity to embargo oil for political advantage again.
Given the specifics of the world now (US/Canadian production capacity from tar sands and fracking, and most of OPEC needing the revenue from sales to keep their economies solvent), an embargo doesn't seem likely.