Why Did Obama Open the Strategic Petroleum Reserve?


On Thursday, the Department of Energy announced a release of thirty million barrels of crude oil over the next 60 days from the Strategic Petroleum Reserve, the nation’s stockpile supposedly set aside for emergency supply disruptions.

Washington, DC – U.S. Energy Secretary Steven Chu announced today that the U.S. and its partners in the International Energy Agency have decided to release a total of 60 million barrels of oil onto the world market over the next 30 days to offset the disruption in the oil supply caused by unrest in the Middle East. As part of this effort, the U.S. will release 30 million barrels of oil from the Strategic Petroleum Reserve (SPR). The SPR is currently at a historically high level with 727 million barrels.

Upon hearing the news, my first question was “What’s the emergency?” Crude oil prices have been falling recently. The market abruptly fell 5%, which will affect gasoline prices in the short term, but the futures market is less convinced that the impact is permanent. (We noted last week, before the release, that the futures premium 6-12 months out was $2 to $3; now it is $4 to $5, all the better for the Koch Brothers.)

I concluded that the President’s goal is a bump in the polls, but that the effect would be short-lived. Most in the media concluded the same.

But then I reread the DOE press release: “… the U.S. and its partners in the International Energy Agency have decided … .” Ach so. Our International President strikes again. Ceding control of a uniquely American asset to an international body is troubling, but par for the course in the Obama Administration.

Then I read the press release one more time.

The Administration will continue to consult closely with other consuming and producing countries in the period ahead.

Reserves in the SPR are sufficient to allow Mr. Obama to play this game from now until the November 2012 election.

Uh-oh. Now I’m really paranoid.

In 2008 the Congressional Research Service issued a report titled “The Strategic Petroleum Reserve: History, Perspectives and Issues” (pdf link) which describes the legal requirements for a President to order a draw on the SPR. Initially created as strictly a emergency stockpile for domestic supply disruptions, in 2005 Congress loosened the drawdown criteria and explicitly contemplated IEA cooperation.

Excerpt from "The Strategic Petroleum Reserve: History, Perspectives and Issues", a report prepared by the Congressional Research Service, May 8, 2008. Highlighting added.

Read that last highlight again. A conniving president could, if I read the CRS study correctly, declare back-to-back emergencies eight times between today and the November 2012 elections. Eight times 30 million barrels is 240 million barrels. Take that away from the 727 million currently in inventory, and it leaves you with 487 million barrels, just under the statutory minimum volume of 500 million barrels.

That’s a half million barrels a day, on average, between now and the election. That’s enough oil to offset the production capability destroyed in the Gulf of Mexico by the Administration’s overreaction to the BP oil spill.

Events in Libya took 1.5 million barrels per day off the world market. The graph below shows a six-month timeline of crude oil prices, showing the effect of Libya’s turmoil on the spot prices for “West Texas Intermediate”, the dominant U.S. benchmark crude oil, and “Brent North Sea”, the European standard.

The dashed line is the price difference between the two benchmarks. Six months ago, Brent crude traded at a premium to WTI of only $1.75 per barrel. WTI prices have been soft because of a relative oversupply of oil at the Cushing, OK trading hub, thanks to recent drilling successes in North Dakota and South Texas. To the extent there is an “emergency”, it’s a lot more urgent for Europe than it is for the U.S.

Who are the IEA member countries? Basically, the European Union, plus the U.S., Canada, Australia and South Korea.

IEA’s announcement of the release makes no separate mention of the U.S., although SPR oil accounts for half the total. In the IEA account, the release was an IEA decision.

International Energy Agency (IEA) Executive Director Nobuo Tanaka announced that the 28 IEA member countries have agreed to release 60 million barrels of oil in the coming month in response to the ongoing disruption of oil supplies from Libya. This supply disruption has been underway for some time and its effect has become more pronounced as it has continued. The normal seasonal increase in refiner demand expected for this summer will exacerbate the shortfall further. Greater tightness in the oil market threatens to undermine the fragile global economic recovery.

Here are some questions that journalists should be asking Secretary Chu, Secretary Geithner and President Obama:

  • Who decided to make this release? Was it an IEA decision, or a cooperative one?
  • Who decided the timing?
  • What is the weighted-average inventory price of SPR oil we’ll be selling?
  • Under what conditions will SPR inventory be replaced, and at what price?
  • Under what conditions do you anticipate future releases, past the current 60-day period?
  • Why not restore production in the Gulf of Mexico, instead of drawing on the SPR?

I’ll eagerly await answers to these questions.

Cross-posted at stevemaley.com.



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38 Comments Leave a comment

Don't hold your breath, the questions and answers arn't coming. nt

gekster (Diary) Sunday, June 26th at 9:14PM EDT (link)

.

They say Republicans are for the rich, Democrats are for the poor.
If they need more voters,
then they have to make more of who they are for.

We are there in the various Tea Party groups, leaderless, but not rudderless.
We steer always toward the Constitutional principles this nation was founded upon.
Erick Brockway

I’ve gone from
“Hope and Change” to
“Hopeless and Changeless”

Comment did not pop up where it is supposed to be.

gekster (Diary) Sunday, June 26th at 9:17PM EDT (link)

a problem?

They say Republicans are for the rich, Democrats are for the poor.
If they need more voters,
then they have to make more of who they are for.

We are there in the various Tea Party groups, leaderless, but not rudderless.
We steer always toward the Constitutional principles this nation was founded upon.
Erick Brockway

I’ve gone from
“Hope and Change” to
“Hopeless and Changeless”

Where was it supposed to be?

Bill S (Diary) Sunday, June 26th at 10:08PM EDT (link)

.

“It’s such a fine line between stupid, and clever.” – David St. Hubbins

Sorry, coment section,

gekster (Diary) Sunday, June 26th at 10:30PM EDT (link)

thought it would be implied.
my bad.

They say Republicans are for the rich, Democrats are for the poor.
If they need more voters,
then they have to make more of who they are for.

We are there in the various Tea Party groups, leaderless, but not rudderless.
We steer always toward the Constitutional principles this nation was founded upon.
Erick Brockway

I’ve gone from
“Hope and Change” to
“Hopeless and Changeless”

Same thing happened to me earlier today

carolina Sunday, June 26th at 10:49PM EDT (link)

My comment showed in the thread, but not in the vertical comment section.

Same thing also happened to me

David123 (Diary) Sunday, June 26th at 10:54PM EDT (link)

this evening

David123

I've noticed posts show up in the "tower" list more slowly...

acat (Diary) Sunday, June 26th at 11:02PM EDT (link)

I’ve been assuming (grin) it’s a cache thing as waiting a few minutes and hitting control+refresh (or command+refresh for Mac) has usually popped them into the list.

Mew

——
self-portrait

Caveat Suffragator

At least I'm no longer an evil double-poster today

YnotNOW (Diary) Monday, June 27th at 5:17PM EDT (link)

:)

YnotNOW
If not me, who? If not now, when?

 
 
 
 
 
 
 

What is Obama up to ...

willhen50 Monday, June 27th at 10:03AM EDT (link)

Obama is creating unrest in the middle east and here. Look at the facts; he is dividing the nation in many ways. The unions versus regular workers, rich versus poor, and democrats versus republican; and if successful he will be close to starting civil riots and a full blown war. Then when 2012 rolls around the nation will be under marshall law that there will be no elections. He has created an almost totalitarian executive branch, the legislative and judicial are irrelevant. He has defied court orders and certainly the will of the people. His czars are the decision makers for his executive orders, and decrees. The man thinks he is the ruler not the leader of the American people.

 

What do you expect? . . . from a Socialist?

poetpatriot Monday, June 27th at 11:37AM EDT (link)

A socialist will not care about abiding within the confines of the Constitution. Obama is an American who is anti-American tradition, heritage, and foundation.

Roger W Hancock
“Liberty is maintained by responsible freedom.” – www.PoetPatriot.com

 
 

The only emergency

banzaibob (Diary) Sunday, June 26th at 9:18PM EDT (link)

Is the declining poll numbers the president is experiencing.

Prefiero morir de pie que vivir de rodillas
It’s better to die upon your feet than to live upon your knees!
Emiliano Zapata

Sales may also cover the defict for a couple days

YnotNOW (Diary) Monday, June 27th at 5:14PM EDT (link)

So that Tim Geitner can juggle the books with oil revenues (30 Million Barrels x $40 = $1.2 Trillion to play with.
That may have been part of the equation and part of the “emergency” as well.

YnotNOW
If not me, who? If not now, when?

And our European "partners" are even more desperate for cash

YnotNOW (Diary) Monday, June 27th at 5:16PM EDT (link)

which is why the IEA may have pushed for this as well….

YnotNOW
If not me, who? If not now, when?

 

Billion, not trillion. n/t

Steve Maley (Diary) Monday, June 27th at 8:19PM EDT (link)

~

The blogger formerly known as ‘Vladimir’.

Sorry, slipped a decimal (or 3)

YnotNOW (Diary) Tuesday, June 28th at 2:55PM EDT (link)

Which emphasizes that the revenue would only cover us a couple days.

YnotNOW
If not me, who? If not now, when?

 
 
 
 

"I’ll eagerly await answers to these questions."

kajun Sunday, June 26th at 9:30PM EDT (link)

Then you’d better take an extra case of Snickers Bars with you and be sure to lick the wrappers. The questions must first be asked before they can be answered and we all know that ain’t gonna happen.

 

Can someone get rich from this....?

NeoKong (Diary) Sunday, June 26th at 9:46PM EDT (link)

For example. What would an oil futures trader do with advanced knowledge of exactly when and how much some more oil is to be released ?
It seems that information might be valuable.

Follow me on Twitter.

 

pantera Sunday, June 26th at 10:15PM EDT (link)

could it be soros has a 500,000,000, 6mth. futures short due 7-5-2011 and he needs a $6 barrel drop or he gets a $175,000,000 loss? and poll numbers.

 

Congress should be asking those questions, not journos.

blooch Sunday, June 26th at 10:49PM EDT (link)

And see what you think of this, Steve:

http://www.aimlesslychasing.com/?p=1399

“Lieutenant Dike wasn’t a bad leader because he made bad decisions. He was a bad leader because he made no decisions.”

 

One theory: spank the evil speculators. nt

carolina Sunday, June 26th at 10:51PM EDT (link)

In a big way,

blooch Sunday, June 26th at 11:11PM EDT (link)

and the potential for more SPR releases gives them even worse heartburn. The power of Government Oil when it is part of a multinational cartel in the hands of statists.

“Lieutenant Dike wasn’t a bad leader because he made bad decisions. He was a bad leader because he made no decisions.”

 
 

It makes no sense, really

Adjoran (Diary) Sunday, June 26th at 11:15PM EDT (link)

The pros who do nothing but watch the oil market – and there are quite a few of them who are quite knowledgeable – believe the price will naturally settle back into the $70-75 range when the Libyan supply resumes flowing, because that’s what supply and demand figures suggest.

But if Obama were to try what is being suggested here, the Republicans should raise Cain over it – the buffoon whose inept anti-energy policies helped drive prices up hopes to artificially knock them back down long enough to ensure his reelection by selling our emergency stash?

 

Obama likes to spend other people's money

dajeeps (Diary) Sunday, June 26th at 11:24PM EDT (link)

Whichever way he can. I heard something about the coating on the reservoirs has to be reworked every few times they are emptied. Not sure how much it costs to rework them, but the last time I checked we were kinda broke.

So what’s he going to do when we have no more oil left in the reserve? Whatever bit we have I’m sure is like taking a garden hose to a raging inferno, and we likely wouldn’t need it at all if his administration hadn’t been choking off prduction. He’s such an imbecile; I don’t know how we survived the last couple of years.

…”I would quarrel with both parties and with every individual of each, before I would subjugate my understanding, or prostitute my tongue or pen to either.”
–John Adams

 

This might be a bit simplistic, but we are talking about Obama.

Melody Warbington (rwm52) (Diary) Monday, June 27th at 12:30AM EDT (link)

With the prices already declining, opening the reserves should cause prices to lower even more. Thus Obama will take credit for the whole thing, i.e., if gas prices go down $2 or $3 per gallon, he made it happen, regardless of the fact they were already declining.

The woman saith unto him, I know that Messiah cometh (he that is called Christ): when he is come, he will declare unto us all things. (John 4:25)

 

A Cushion for Future Bad Policy?

kipling (Diary) Monday, June 27th at 12:37AM EDT (link)

Perhaps Mr. Obama wants to create a cushion to soften the impact of future bad policies. For instance, Mr. Obama decides to put the sage brush lizard on the endangered species list and thus shuts down much of the new production coming out the the Eagle Ford shale deposits in Texas. The decline in production is softened by the release of the strategic reserves. He then gets to further curtail domestic production while delaying the consequences until after the election.

 

In defiance of the people.. the first anit-America President

jeffex11 Monday, June 27th at 6:18AM EDT (link)

He sees America through a different set of eyes that most of the citizens.. He knows he has been lying to the American people from the jump….He also knows that talk of impeachment or any other response has people in neutral .

He is selling out America at every turn. Looting the treasury and devaluing every thing WE own valued in dollars. This use of our strategic energy reserves is just another example of his disdain for America as we know her.

All of HIS efforts are to bring down our America while his minions set in place the regulations and plans for their new Marxist version of this nation.

His goal is anything that will weaken the Imperialist America is good for him. When they fulfill the Cloward and Piven strategy and collapse this economy they have a new constitution ready to usher in this new power of government OVER the citizenry.

Collapse Capitalism by any and all means . Shut down the fuel supply of wealth investment in to the engine of Capitalism through the uncertainty of policy AND the certainty of policy like the higher cost of Obamacare.

Is there any doubt left that this administration is the enemy of our Republic and our constitution.

no doubt in my mind

4suramcan Monday, June 27th at 7:18AM EDT (link)

now or since before his election. BUT… people just sitting around watching, letting it happen.

 
 

The Right

scottb Monday, June 27th at 8:36AM EDT (link)

is just as bad as the Left. Neither party can stand it when the opposite party does something good. Obama opened the reserve for the same reasons that Bush did. Nothing more, nothing less.

Not true - not even close

johnCV (Diary) Monday, June 27th at 9:24AM EDT (link)

In 2004 President Bush released some oil into the system because of a shortage caused by hurricane Ivan on 2004. At the time Sen Kerry also called to stop filling the SPR to relieve pressure on the market. During that period we lost over 11 million barrels of production due to the hurricane. Bush released about 2 million barrels into the market to stabilize it. At the time oil was around $50/bbl (a record) and rising.

We are at $90 and falling (with a record high of $140/bbl).

Please peddle that ‘they all do it’ crap somewhere else. 0bama is only doing this for international and domestic political purposes. He is a craven marxist ideologue who seeks the reduction of this great country. GWB, while you may argue against some of his policies, can never be accused of not putting this nation above all else.

Perhaps scott confused Clinton for a Republican...

acat (Diary) Monday, June 27th at 9:34AM EDT (link)

Clinton sold off a bunch going into the 1996 election…

Mew

——
self-portrait

Caveat Suffragator

 
 

Intellectual relativism and "scottb's" recent display

funwithknives Monday, June 27th at 10:16AM EDT (link)

How is it “Something Good” for GOV’T to distort markets, with Gov’t Assets? (That’d Be YOUR MONEY, Scotty!) Obama wanted to do “good”, 95 days(!) after he got us into the conflict that no one really wanted? Why not The DAY After? A week? Prices were dropping on their own, but it’s Campaign Time Once Again. BARRY can now point to this, and at many 60 day intervals and say “See!, I’m FIGHTING FOR LOWER FUEL PRICES!” and BOOBUS AMERICANUS will go for that, ‘Cause HimSelf will look “Real Concerned” and Professorial, while Saying same. Prices going down are a reflection of Stabilizing supplies, and use projections referenced to past history,and are reality in action Please Consider: since Virtually everything This Administration has EXPECTED or Projected( AKA, Not Reality!) has gone to hell or been unrealistic from the start, WHY should any thinking Person expect THIS decision to be ANY different?? THIS is SCOTTY’s Idea of DO-GOODISM? Better BHO should golf every day for a month and simply do NADA. E/Mail Him and Request He Try THAT and see what the Short-Term results are. One positive would be not seeing him speechifying, Day In and Day Out. Ever read “The Boy Who Cried Wolf” ??

 
 

Excellent information Steve

mirac777 (Diary) Monday, June 27th at 8:37AM EDT (link)

Yes Obama could be vote-begging here and taking credit for what appears not to be his decision, as in it was the IEA’s decision. Anothering interesting tidbit, is the aspect of an International Globalist group can/has/ made U.S. energy policy in this situation.

This fits the Socialisit Obama agenda also of trying to turn us into Europe, yet not appear to do so by claiming the credit for this. release of oil as a fake concern to help the American public.

The last fact I want to point out is that it had been proven that this release of oil reserves will not have ANY effect on our gas prices!

This is just like the EU saying it will bail out Greece AGAIN, and low and behold that money goes to prop up………..DEUTSCHE bank of Germany! They made unwise investments in Greek debt and now the EU is again bailing out DEUTSCHE bank- not Greece. And Obama meeting with Merkel speaks of the U.S. money that will also be slid to this Greek bailout through the IMF, – it is all pretty much Globalist big bankers and manipulators stealing our wealth- with the help of our very own Government!

United we stand…. Divided we fall.. into the pits of Socialism.

Differential chart is particularly revealing

YnotNOW (Diary) Monday, June 27th at 5:22PM EDT (link)

in that it exposes the fact that the Libya disruption is a problem causing higher prices in Europe, not in the US. Obama is only going along and out-sourcing his foreign policy (yet again) because THEY are experiencing difficulties. It is NOT a US strategic need.

YnotNOW
If not me, who? If not now, when?

 
 

mirac777 (Diary) Monday, June 27th at 8:45AM EDT (link)

Officials need to keep things in perspective. The current rise in gasoline prices is not a supply-and-demand problem, and any attempt to compare it to the gasoline lines of the 1970s is utterly misleading and disingenuous. Unlike during that genuine crisis, gasoline today is widely available, and there are no supply shortages.

No one talks about what it will cost to replace the oil reserves either.
The reserve has a supply of 725 million barrels, which represents only 48 days of consumption. If we were to begin to use that oil to stabilize energy markets today, and not as a supply safety net, we will be jeopardizing the security of our nation. Imagine that we did not have the SPR to rely on and our foreign supply is really shut off? What will happen to gasoline prices then? Gas prices could easily hit $7 a gallon, and even $10 is possible. Why would the president risk such a horror.

This could be a big part of Obama’s mission to collapse the U.S. economy and make all Americans dependent on the gov’t for survival- thereby turning us into USSA- The United Socialist States of America.

United we stand…. Divided we fall.. into the pits of Socialism.

Why would the president risk such a horror.

gunslingr45 Monday, June 27th at 9:43AM EDT (link)

what I want to know is who called him a president?

“I would be a poor Commander in Chief”
– Barack Obama, July 3 2008

 
 

poetpatriot Monday, June 27th at 11:30AM EDT (link)

Socialists need no emergency to evoke emergency actions. Obama will do whatever he can get away with. He is a socialist with only the restraints of the Constitution the Congress will enforce. When a law is not enforced it has no restraints to protect our liberty.

Roger W Hancock
“Liberty is maintained by responsible freedom.” – www.PoetPatriot.com

Constitution vs. Foreign Authority Over It (!?)

Ausonius (Diary) Monday, June 27th at 12:16PM EDT (link)

Given that no emergency exists, except in a socialist parallel universe, can MAObama really hide behind any idea that Section 42 U.S.C. 6241(h) >>forces<< him to release the oil, just because the IEA says it wants to do so?

There is a trend in leftist jurisdumbness that wants assorted decisions of foreign countries to be binding in America, and not just used as examples of supposed "wisdom" or modern trends cited in judicial opinions. Do we have here the placement of a foreign authority over U.S. policy to compel action by the government? The excerpt of the law above would seem not to indicate that, but if it does, how could that be Constitutional?

Does anyone know of any lawsuits challenging the Constitutionality of the above laws, especially on grounds of vagueness: "When I use a word," said Humpty Dumpty, "it means only what I want it to mean!"

"Crisis" would qualify here for Humpty's philosophy. :)

Ausonius: 310-395 A.D. Teacher, Poet, Consul, General, Farmer.

Personal Tutor to the future St. Paulinus of Nola and to young Gratian, heir to the throne during the turbulent final years of the Western Roman Empire. When his former student Gratian was assassinated, Ausonius threw up his hands and retired to his farm in Gaul. Rome was captured by barbarians 14 years after his death.

Cato@rock.com

AND…Know Your Czars…Before They Hit BIG BRObama’s Unemployment Line in November: http://www.czarcards.us/

 
 

This is very simpile

ihateliberals Tuesday, June 28th at 3:02AM EDT (link)

The release of the 30 million barrels into the flow of crude doesn’t have much affect on the reserve and has absolutely no effect on the price of gasoline. The USA use approximately 20 million barrels per day so if this were released all at once would only last a day and a half. The speculators won’t een know that it happened. What will happen though is that the Gas prices were already on the way down. By releasing this he can convince the un-educated Democrat that he is responsible for lowering gasoline prices. If he really want this to work he would have done it back in the winter and would have release much more. This is just for show. 30 million barrels released in to the system would be like someone dumping a swimming pool of water into the ocean to raise it one foot.