Friday, June 24, 2011

The Strategic Petroleum Reserve emergency explained

We now have had a one-day positive bounce to the announcement that we have opened the Strategic Petroleum Reserve to the tune of some 30 million barrels, & the question remains about how this is to have any lasting, positive effect.
Indeed, crude supplies could tighten again by late this year, predicted analysts with Barclays Capital, who argue that the influx of government oil will lead Saudi Arabia to reduce output it had pledged to cover the Libyan shortfalls. That could send crude prices higher into next year, they said.
If Obama feels that releasing this two-days-worth of oil is a good idea, & if he feels that Saudi Arabia producing more oil will help (though the coordination of the move with the Saudis suffered), then why not allow more production of oil here in the US?  The Alaska National Widlife Reserve (ANWR) deposits could produce up to a million barrels a day with minimal impact on the environment.  If the administration would allow it, the Gulf of Mexico could yield an additional 300,000 barrels a day.  Approval of the Keystone Pipeline out of Canada could yield 900,000 barrels a day.

We are depleting supplies of oil that we have stored up for an emergency (which will have to be replaced eventually at a higher cost) to put them on the market in order to reduce gas prices.  Likewise, we are encouraging the Saudis (though clumsily) to increase production as well, for the same reason.  Why don't we take our own advice?

Perhaps my favourite political cartoonist is Michael Ramirez, who suggests an answer:

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