Time to top up strategic oil reserve?

By Reuters Staff
November 18, 2008

The Bush administration could take advantage of falling oil prices and plummeting fuel demand to replenish millions of barrels of crude into the U.S. emergency petroleum stockpile.
The Energy Department is sitting on a hefty $584 million it raised from selling 11 million barrels of crude to refiners from the Strategic Petroleum Reserve in 2005 after Hurricane Katrina laid waste to the country’s energy infrastructure.  The department wanted to replace the sold barrels, but balked at the cost as the oil price marched relentlessly higher, hitting a record above $147 a barrel in July.
But with a weak economy, crude costs have fallen by more than half to $55 a barrel this week. That is close to the same price the Energy Department sold those 11 million barrels of oil three years ago.
If the department doesn’t use the cash in its piggybank before the Bush administration comes to an end on Jan. 20 some lawmakers want the new Obama administration to use the money to promote alternative energy.
The Energy Department said it is “examining and analyzing” the idea of buying oil for the stockpile now that prices have fallen, but no decision has been made.
Guy Caruso, the former head of the department’s Energy Information Administration who now works at the Center for Strategic and International Studies, said buying the oil back  at a delivery rate of 100,000 barrels a day for three and half months would have little market impact and not raise prices.
“With demand being down now, there’s a lot more excess  production capacity. I think producers would love to have a new customer,” Caruso told Reuters. “I think now is an excellent time to do it, unless you’re thinking wait a couple of months and it might be lower,” he added.
The U.S. emergency oil reserve, created by Congress in 1975 after the Arab oil embargo, holds 702 million barrels of crude, but has room for 727 million barrels. The department plans to add 7.7 million barrels of oil to the stockpile from January through May of next year, which would return barrels loaned to refiners this summer when Hurricanes Gustav and Ike disrupted supplies. 

– Tom Doggett

Comments

We seriously need to get on with the business of becoming energy independent. While we are doing the happy dance around the pumps with the lower prices OPEC is planning yet more production cuts and will not quit until they achieve their desired price per barrel. The record high prices this past year have done serious damage to our economy and society. WE must move forward with energy independence. We have the knowledge, we have the technology, what America lacks is a plan. Jeff Wilson has a new book out that is beyond awesome. The Manhattan Project of 2009 Energy Independence NOW. He walks you through every aspect of oil, what it is used for besides gas, our depletion of it. The worlds increased need ie 3rd world countries becoming more modernized and consuming more. He explains EVERY alternative energy source and what role they can play to replace oil. His research is backed up with hard data and even includes a time frame and proposed legislative agendas to wean America off oil. http://www.themanhattanprojectof2009.com

Posted by sherry | Report as abusive
 

fill the reserves, but be sure to buy low. the damage from the high price of oil was the inflation bubble (now collapsing) of the last few years. install more hydroelectric power on the system and cap the utilities.

Posted by steve | Report as abusive
 

the Manhattan project 2009, absolutely sounds good. certainly, if the Bush administration does not make the move of purchasing more oil to US’ reserves definitely Obama’s administration will not hesitate to spend that money for alternative oil. which in my opinion is BETTER.
take advantage from the oil now that is very cheap. if you think the oil price will stay this low (under 2.00$) i certainly do not think that will happen. the price is low, therefore the oil consumption will skyrocket at this very moment. i don not know why the media is stating this in a contrary manner. they say that “consumption of oil is falling because oil prices are down.” this is not what the law of demand estates.

 

One question regarding falling oil prices.

Can someone, anyone, in media or politics, please offer an explanation as to how it is possible for oil prices to plummet 100% from 146$ a barrel to 49 a barrel in two months? Because it looks to me like someone, i.e. the oil cartel was bloating the price to compile capitol.

thanks

Posted by George | Report as abusive
 

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