What I don't understand is why we're selling oil from the Strategic Reserve to China. I've asked people in the oil business and even they're perplexed. If we're going to sell some to another country why not to one of our European allies?
Nobody is perplexed, but this has sadly become a Republican talking point. The facts are here [1]. Key quotes:
> However, because the price of gasoline depends largely on the cost of crude oil, which is mostly based on global supply and demand, experts told us that oil sold from the reserve does not need to stay in the U.S. to bring down gasoline prices.
> For each sale, the Energy Department announces the type and amount of oil from the four SPR sites that will be auctioned in a competitive bidding process. By law, the contracts are awarded to the companies that make the highest bids, and any company that is registered in the SPR’s Crude Oil Sales Offer Program is eligible to make an offer.
> Finley of the Baker Institute said that American refiners have to determine if they can use the reserve oil that will be released. If not, it may be of use abroad.
> “Each individual refinery is optimized for its marketplace and is built to run optimally on a certain type of crude oil and to produce a certain mix of gasoline and diesel fuel,” he told us. “And so it may be that the type of oil being offered from the Strategic Petroleum Reserve doesn’t perfectly match what the U.S. refiners are looking for and it might be a better match for the specific requirements of refiners elsewhere.” Kilian made a similar point. “If the oil released is medium sour, for example, a U.S. refiner specializing in light sweet crude would not be interested,” he explained. “There may be spare capacity at a refinery in Europe, however, that specializes in processing medium sour crude, so trade makes sense.”
US refineries are already operating essentially at capacity [2] for various reasons. So no matter what, the crude oil that gets released that can't be refined here has to be exported.
> US refineries are already operating essentially at capacity
A perplexing aspect is why USA provides a strategic reserve to anyone other than USA. If the answer is "tactical price suppression" then let's change the branding of why USA has these reserves. If the reserves are truly strategic, then don't allow export.
It's strategic in the sense that it maintains stability, reliability and dependability of a core necessity for the contemporary economy and society to function.
If exporting crude oil that US refiners can't use anyway has the downstream impact of Americans getting the products they need (perhaps due to manufacturing overseas and ocean transport to bring those products here) then it seems like it's reasonably in the public's interest to do so.
> a core necessity for the contemporary economy and society to function.
I agree that petrol is fantastic. A great part of this federation of States is that if I really don't agree with the direction/taxation of an individual State then I can vote with my feet. It is disappointing that California's experiment with ending internal combustion transport, ending oil refining, and reducing nuclear electricity generation will be bailed out by lower energy prices by everyone else in USA due to the SPR. If the feds get out of commodity speculation and manipulation, the choices by California can shine on their own merits.
If they only sold barrels from the reserve to companies in the US at artificially low prices compared to the rest of the world, what would stop those companies from taking it and selling it for a profit across the border instead of passing the savings down the chain to US consumers?
As far as I can tell, this is literally the only way to make such a strategy work.
It is a talking point because it is disgusting behavior from our government. The idea that a part of our strategic oil reserves doesn't match what we want to refine locally or in our allied countries is laughable.
You keep it in the US. Price globally goes up, oil price goes up globally = price in the US goes up regardless of what your reserves are doing => your strategy failed.
I agree the strategy failed but the rest of what you said is wrong. We don't care about the global price. We care about the price paid to Russia. There isn't enough in our reserve to move that needle.
We do care about the global price, because before those reserve barrels reach the gas tanks of Americans, they go through about a dozen greedy hands who would gladly sell them over seas to turn a profit for themselves.
If you can think of a way to keep that from happening that doesn't involve the global price of oil, you should be working for the white house and not sitting in your armchair.
Are you under the impression that working for the white house is a prestigious position? These aren't America's brightest filling these positions. Quite the opposite.
That seems like an odd financial speculation to partake in as the government. Why not just buy whatever oil they need for the reserve and then speculate using futures or whatever instruments they like?
Because the entire point of a reserve is to lower peak prices and it doesn’t matter who your selling it too someone inside or outside the country. Global markets respond to global supply and global demand.
The other option is to ban exports, but no reason to start there when we have a reserve.
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,
To expand, the genesis of the SPR was the 1973 oil embargo.
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.
---
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.
The SPR has ... at least some precedents ... in the earlier Naval Petroleum Reserve, which was specifically created as insurance of supply of oil to the (recently converted-from-coal) US Navy, which dates to 1910 (Pickett Act) under President William Howard Taft.
At the time, petroleum was still relatively novel and poorly understood geologically --- how much existed and how long supplies would last would be hotly debated in an argument that continues to the present, though much geological and paleological origin and genesis understanding was achieved between the 1950s and 1990s. But in the 1920s (and for considerable time afterwards) there was great uncertainty as to how long useful access might persist. It was also abundantly clear that petroleum was an absolute game-changing factor (and instigator of) 20th century warfare.
The Naval Petroleum Reserve played a starring role in the biggest US political scandal until Watergate, the Teapot Dome Scandal of the Harding Administration (1921--23), leading to the first criminal conviction and imprisonment of a US Cabinet official (Albert B. Fall, Interior).
The Naval Reserve was transferred to the US Department of Energy in 1977 by US President Jimmie Carter, though the US Navy continued to direct the programme for another 20 years.
The strategic reserve is there to serve strategic purposes.
Being able to counterbalance supply restrictions by the Middle East cartel is a very powerful strategic tool. It’s a clever move when you consider that the reserve can be viewed completely differently now that the US is a net exporter.
It's a global market. Europe needs X barrels, China needs X barrels. If China buys from the us, it isn't buying from Canada and visa versa. Extra supply benefits all buyers whether China or Europe.
Right, oil is fungible (well almost - there are different grades).
But a barrel is a barrel is a barrel, anywhere in the world.
So if we sell to France and Russia sells to China, it's no different than if we sell to China and Russia sells to France -> the "same" oil ends up in the same place and the same money ends up in the same place.
This (fungible, worldwide market) may explain why embargoes don't generally achieve the stated goals. Your explanation shows the goods still travel, though through more middlemen.
Would you mind clarifying how they are wrong? One plausible reason might be that there are different kinds of oil and refined products, so different buyers aren't actually just buying "oil."
I'm not the person who you asked, but I think his point is with the keyword "unlimited". Fossil fuels are not unlimited, so selling a reserve of a limited asset doesn't seem to be a good strategy.
Selling it to a different country at the same price would just mean China becomes the next buyer and gets it from the next source at whatever the next price is. And because the other country didn't buy it that price would be cheaper.
The whole point is to lower prices, and prices are set globally.
Oil refineries are build to use a certain kind of crude, if you got crude from somewhere else you might have problems.
When there was a minor supply shock in the early 2000's some refineries in the US South got the wrong stuff and produced batches of gas that could dissolve the plastic float that indicates your fuel level and people ran out of gas because the fuel gauge would always read full.
(I went through a phase of filling the gas every time I went for a drive and it freaked out my wife and my son because they knew that story and thought the gas gauge had failed.)
Physical items have geographic price differences due in part to transportation costs. If the point is to lower worldwide oil prices, the USA government should stockpile oil closer to China. I'm not recommending USA operate a CN Military Oil Reserve.
Canada might stand to gain on LNG? We have some import terminals but no export terminals[1]. We announced agreement on a project to export hydrogen to Germany [2]. But there are no means for us to export LNG to Europe in the short to medium term (and no one would want it anyway, in the medium to long term. LNG is expensive and emissions intensive, particularly with fugitive emissions [3]).
Selling the reserve for votes is just a play to lowering prices short term. It doesn't really matter who the buy is at that point since the market is so globalized.
There's also the potential that selling to China was a nice way to test the waters and see if that impacted Russian sales at all, but the reserve is auctioned off so that may not play a factor at all in the actual sale.
No, they will not be paying in dollars. Only pay the dollar-equivalent price, but in other currencies. Saudi Arabia is accepting RMB from China for example.
That won't always be the case. Basically, it's all about with whom you trade most. If Saudi Arabia finds themselves in a position where they have 50+% of their imports and export originates in China it will make sense to switch to RMBs to all trades, and the dollar price of oil, or other goods becomes irrelevant. And the Chinese economy is on track to become bigger that American by 2030.
Had no idea this was political at all or I wouldn't have posted it on here. Seems to me that the strategic reserve should be used to help America only seeing as how tax payers pay for it.
If an American oil company wants to sell their own production to China that would be OK. They shouldn't be able to use oil they procure from a release of the strategic preserve in my opinion. We store the oil to help buffer oil prices from interruptions in production.
The video linked by gp says the reason that's possible is that congress lifted a US crude oil export ban in 2015.
Since this is indeed a conservative talking point it's worth noting that the lifting of the ban was passed by a Republican-controlled congress over the objections of then-president Obama, who then signed it despite having previously said he'd veto any lifting of the ban, because the provision was tacked onto a "must-pass" omnibus spending bill. [1]
Of course the right thing here, if there is an actual problem, would be to have a debate about whether to put the ban back in place or make some law specifically about not exporting oil purchased from the strategic reserves, but apparently the Republicans would rather impeach Joe Biden for some reason.
> Of course the right thing here, if there is an actual problem, would be to have a debate about whether to put the ban back in place or make some law specifically about not exporting oil purchased from the strategic reserves...
If you want to debate that, sure. It won't work because oil is a commodity. If the US cuts itself off from the global markets that would be kinda stupid (because then it can't swap paper for oil, which is a great trade). If it doesn't then any oil it supplies will have knock-on effects making the market price cheaper in some sense. Foreigners would still get about the same benefit.
China tried to ban Australian coal the other day. It was hilariously ineffective. They bought coal from other countries, and we sold coal to the people who just had their coal redirected to China. Net effect, we continued to enjoy the coal boom.
They can try to put that ban in place, but it is meaningless and quite likely can't do anything unless America tries to go full autarky which, ironically, would probably raise the gas price they pay. It is unbelievably tricky to have a commodity market that has 2 different prices for the same good and has any sort of international trade happening.
PS Indeed, due to the magic of markets, if the politicians succeeded there is every change US citizens would be worse off, because they could have traded the oil for something they wanted and then they ended up with something of lower utility. Starve China of oil & the US gets less iPhones for example. If that special gas was used to drive to the Apple store, the scheme would look pretty silly.
> Had no idea this was political at all or I wouldn't have posted it on here.
This might be true, but a lot of people see that and think "yeah right!". The problem when topics become political is any intelligent discussion gets suffocated.
> We store the oil to help buffer oil prices from interruptions in production.
Sort of, but it's a bit more nuanced I think (right or wrong).
From evergy.gov:
----
The Strategic Petroleum Reserve (SPR), the world's largest supply of emergency crude oil was established primarily to reduce the impact of disruptions in supplies of petroleum products and to carry out obligations of the United States under the international energy program.
----
You could easily argue that what they are currently doing is congruent with this mission by participating strategically in the global market.
I don't know that I agree with it being a good approach from my simpleton perspective, but I doubt it's being done as some sort of pro China move at least.
It isn't. The person above is trying to browbeat you for holding an opinion which is not advantageous to the election prospects of their preferred politician.
Ignore the other answers to you - they're referring to refined products, not crude. Straight from the strategic reserve FAQ, crude oil doesn't really degrade if stored properly: https://www.energy.gov/ceser/spr-faqs#Q14
Note that if it's not stored properly, it can degrade due to water intrusion and oxidation, and it can just evaporate.
Refined oil products (e.g. the stuff you put in your car) go "bad" because they evaporate. In particular, different substances within the fuel evaporate at different rates, so over time the "mix" degrades away from the optimal ratio. If you put old, degraded fuel into your car it can damage the engine.
You can make fuel last longer by storing it in a cool, dark, airtight place, and there are products you can add to make it last longer, but the general rule is that petrol lasts about 3 months and diesel lasts around 6, or at least that's what I've read.
Entropy, sadly, is an immutable and inescapable law of the universe.
Yes, but the time scale varies widely depending on how it's treated. Gas you get at the pump might start degrading as fast as in a few months, as it's meant for immediate consumption and thus treated less to keep costs down. Gas that's treated for long term storage can go for up to a few years, but that adds extra cost. The main sources of degradation are oxidation and contamination, both from air and impurities. If you can, it makes economic sense to rotate the oil like you might rotate a log file so it's always reasonably fresh.
This is the point which is overlooked - which of the enumerated powers granted by the people to the federal government allows the federal government to maintain a non-military oil reserve for the purpose of manipulating worldwide prices? Let companies and the free market supply oil.
I will save the room 5 minutes, the major points in this video seem to be (a) the speaker doesn't like Marjorie Greene and (b) points out roughly that oil is a commodity, and if released into the market is going to get sold to whoever pays the most. That might be anyone in the world.
I do agree - it is a mistake to focus on where the oil is being sold. What is more interesting is that the strategic reserve is not being used strategically. I would argue it is being used ineffectually, the problems here go a bit deeper than what the SPR could possibly cope with. At this rate it is going to run out and not even make a marginal difference.
passing the blame to the party that was in power 7 years ago, for allowing this to become law, vs blaming the current regime that’s unloading SPR to China… an expected coping mechanism from the modern democrat
Well.. what _strategic_ goals are we accomplishing with the "strategic petroleum reserve?" To sate the world market for a few days? Or, given the OPEC view, simply provide slight downward pressure on prices for a few weeks?
I don't understand your point; that factcheck article confirms the accuracy of the statement that the US is selling oil from the strategic reserve to China (among other countries). It provides more context, yes, but it confirms the statement.
If you need vital goods to run your day to day operations, you'll be willing to overpay off it means you don't have to shut everything down even more than you've had to do so already. Your net benefit as China might outweigh the cost, even if you must buy anyways. The alternative is shutting down the economy more than has already occurred.
Why downvote this comment? It's additive to the conversation... Why make it political when the comment is perfectly fine, stating another point of view?
Linking to something Ana Kasparian says as if it is insightful is the equivalent to linking to Rudy Giuliana’s podcast, or Donald Trumps twitter clone as if it’s insightful.
It’s just absolute hyper hyper hyper partisan nonsense.
Is there something wrong with this video? It seems pretty factual to me that oil is sold in an open market and companies just sell it to the highest bidder. Using the reserve like this is perfectly reasonable to avoid (more) chaos.
Ana Kasparian is a partisan left-wing hack. She’d be considered the partisan left-wing hack if her co-host, Cenk Uyghur, didn’t exist.
Granted, her video may or may not be factually correct but you might as well get your political coverage from Putin himself if you care this little about where it comes from.
Just because someone points out facts that happen to be bad for the current administration doesn’t make it a “right wing talking point.” Even in political terms, criticism of a democrat isn’t necessarily aimed at “the right wing,” because the plurality of the population identify as independents.
But that is what happens when you watch MSNBC and CNN, and the vice versa when you watch Fox. An entire generation now exists incapable of having intellectual arguments thinking beyond party line just because the people they follow in the media (social and news) continues to drive the argument in terms that is very close to derangement syndromes.
Both sides are responsible but one one side is more amplified due to their majority presence in HN.
So about 3.17% of the total sales (30m) went to Sinopec's American subsidiary, and a lot more sold to European companies. I honestly don't see any problem of it.
There are many problems. First and foremost, the strategic oil reserve was designed to make the US more resilient to a 1973-style oil embargo. Whatever is going on in the US right now pales in comparison; the drawdown is simply a political ploy, a superficial appeasement, bread and circuses. The sale of the oil to offshore refineries of a strategic enemy proves this, does it not?
> First and foremost, the strategic oil reserve was designed to make the US more resilient to a 1973-style oil embargo
Unlike 1973, the US is now a net-exporter of oil. Since a meaningful OPEC oil embargo on the US is all but impossible[1] - then it makes sense for the strategic goals to evolve from "avoid shortages" to "stabilize price shocks".
> The sale of the oil to offshore refineries of a strategic enemy proves this, does it not?
It only means domestic refineries interested in that grade are at capacity, or were able to source it elsewhere for cheaper. China could full well push up the global price when buying from "elsewhere" too.
Oil is a single global market, there is no logical way if lowering american crude prices while global prices are high. That will just lead to price arbitration until there's an equilibrium.
1. Simplified by ignoring domestic refiners' & exported crude type mixes
Because businesses aren't communists, or red, or blue, they just sell stuff to people who want to buy it, and apparently, it's not illegal to sell things to China because freedom?
Actually, the US government has released oil from the SPR while simultaneously undertaking to buy oil in the future at a given price (i.e. engaged in the futures market) in an effort to control the oil futures term structure. This not only helps ease current supply issues but also works to stabilize future production by giving producers some modicum of relief from boom/bust nature of industry.
The government is getting smarter: financialization can on occasion actually be extremely useful.
Pick your talking point. It’s either “sleepy Brandon” if the administration does nothing or some craven scheme to win elections if something is done.
Maybe they’re just doing their job? Seems to me that every time the heat gets turned up on the former guy’s criminality or more is learned about the attempted insurrection/coup, nutty orgs like the WSJ Editorial Board roll out some nonsense.
It’s not either, it’s both. Brandon is not in charge. Take for example the statements he made in 60mins about sending US troops to Taiwan & the pandemic ending, both of these are walked back by “the whitehouse” (handlers). Brandon is not even allowed to talk to the press outside of carefully controlled, scripted scenarios and even those he screws up.
They’re desperate to maintain power across all branches of government and this being an obvious political move to taper gas prices, as that was hurting polling stats. That’s the only thing that prompts action.
> Take for example the statements he made in 60mins about sending US troops to Taiwan & the pandemic ending, both of these are walked back by “the whitehouse” (handlers). Brandon is not even allowed to talk to the press outside of carefully controlled, scripted scenarios and even those he screws up.
Or maybe that's all planned because the Taiwanese people need to hear we'll definitively support them while we maintain our official ambiguous position. Point is you don't really know. Are you there in the White House?
Then why don’t they articulate this to us? Seems more like they are finding any way possible to mask the economic pain we are facing. Print money, fire-sale our assets, borrow more. Anything to push out the day of reckoning and ensure that the music stops under someone else’s watch.
Because the median voter's eyes will glaze over as soon as you say "oil futures term structure", and is more likely to say what you just did than to entertain the idea that there may be a second order game in play.
The people who need to know, know. Everyone else can pretend that there are children in charge.
So would your preferred solution be to endure maximum pain now?
Even the Trump team, to their credit, understood that the economy imploding due to the COVID actions was a bad thing - so they rushed capital into the market to keep things moving. That caused inflation, but inflation is a better outcome than the alternative.
We don’t live in a video game, and there’s no cheat code to make problems go poof.
Yeah I don't get what the parent comment is proposing.
People say this or that will happen in the long term, but there are so many impossible to predict variables that the best you can really do is try to keep the economy robust enough to absorb shocks.
Economy slowing because of COVID? Deal with that.
Inflation happening because of constrained supply chains? Use the oil reserve to reduce the price.
These are pretty reasonable policies that both side of politics would do when in power because they make sense.
My preferred solution would be that we resolve the Ukraine crisis by negotiating peace, lift sanctions, and unblock the Russian-European energy market which is, I assume, the source of this pressure. Tell Ukraine they have to make peace, and if they aren't reasonable at the negotiating table there is no more NATO support. Offer Russia the chance to save face while they are doing badly, and throw in the promise of no NATO in Ukraine for 20 years.
Peace only happens when Russia fully leave Ukraine (including Crimea), returns all kidnapped Ukrainians and the responsible Russians faces punishment for the rape and genocide of Ukrainians.
Ukraine also needs to receive security guarantees from a country that is military strong enough that they could push back Russia in a small amount of time.
Any less is capitulating to Russia and shouldn’t happen.
No, peace happens when all participants agree there should be peace. That could be in a "Russia completely repelled" situation, it could also be in a situation like the present, where Ukraine has had remarkable success on the field and decides to ask for peace at a time where Russia might want to cut their losses. As I mentioned, the US could enhance the peace offer by adding in a NATO moratorium for Ukraine. Of course, peace could come in a situation that was more favorable to Russia too. If their mobilization works better than expected, and their army starts to get their act together, or they unleash tactical nuclear weapons, or they wait till the dead of winter and level Ukrainian power, or who knows what?
The US and Europe never committed to a suicide pact to ensure the sovereignty and integrity of every nation in Eastern Europe. We should not be acting like we have signed this pact. We do not need to risk World War III over who controls a few territories in Eastern Ukraine.
> If their mobilization works better than expected, and their army starts to get their act together, or they unleash tactical nuclear weapons, or they wait till the dead of winter and level Ukrainian power, or who knows what?
I doubt that there mobilisation will produce any results outside of more dead Russians. I mean there professional army has been destroyed so baldy that they need mobilise and you think random citizens will make better soldiers?.
US has made it clear that any use of tactical nuke in Ukraine is a real line in the sand.
It would likely result in US direct involvement in the war in a conventional matter. But that’s easily enough considering just how bad the Russian army has been shown to perform.
> he US and Europe never committed to a suicide pact to ensure the sovereignty and integrity of every nation in Eastern Europe. We should not be acting like we have signed this pact. We do not need to risk World War III over who controls a few territories in Eastern Ukraine.
I’m sure you’d care more if it was your children being raped, if it was your children being tortured, if it was your people having genocide committed against them.
It’s always interesting to watch the pro Russian people bang on about nukes whenever Russia starts losing.
It’s so transparent, they rattle the nuclear sabre because they won’t even think of using actual nukes.
I do think the Russian army has been performing poorly and perhaps it will continue to. On the other hand, perhaps it won't. Or, perhaps the poorly performing Russian army will resort to measures, like nuclear weapons, that we would sincerely prefer them not to use.
I think direct US involvement in a conventional war against Russia is a very, very bad outcome. That's a large part of why I oppose continuing the war and think it would be a good idea for there to be peace.
It doesn't make me pro-Russia to prefer peace to war and want a settlement. That just makes me pro-peace. Killing more Russians will not restore life to the dead or undo the tortures that were inflicted on the living. The reasoning that, because the Russians have done bad things we must prolong the war leads to needless additional suffering.
How many hundreds of thousands of people should die to determine which flag waves in Donbas, Luhansk, or Crimea? How many billions will we put at risk by increasing the odds of nuclear war?
> perhaps the poorly performing Russian army will resort to measures, like nuclear weapons, that we would sincerely prefer them not to use.
I think that this is the poorest decision that Russia could make, and I actually think Russia knows that too, which is why they posture about nuclear strikes without actually doing anything.
> I think direct US involvement in a conventional war against Russia is a very, very bad outcome. That's a large part of why I oppose continuing the war and think it would be a good idea for there to be peace.
I think ending this war as quick as possible if a nuke is used is a very good outcome and that involves overwhelming conventional force at this point.
> It doesn't make me pro-Russia to prefer peace to war and want a settlement.
being pro-peace is great, but it should be peace on Ukraines terms, not on the aggressors terms.
> That just makes me pro-peace. Killing more Russians will not restore life to the dead or undo the tortures that were inflicted on the living. The reasoning that, because the Russians have done bad things we must prolong the war leads to needless additional suffering.
The Russians are the ones who every day choose to prolong the war, they are the only ones who can choose to end it.
> How many hundreds of thousands of people should die to determine which flag waves in Donbas, Luhansk, or Crimea?.
Ask the Russians they are the only ones who are prolonging this war by staying in Ukraine and containing their genocide of the Ukrainian people.
> How many billions will we put at risk by increasing the odds of nuclear war?
I don't think this has increased the odds of nuclear war at all, there hasn't been a reported change at all in Russias nuclear posture and to be quite frank the Russian nuclear sabre rattling got old months ago.
The only aspect of it that people actually care about is how much gas costs at the pump, the rest of it is just media froth, so I can see why the government isn't working very hard to repeatedly communicate that they are participating in the market in an attempt to smooth out supply and demand.
That they are selling and buying into the global market is a lot better than trying to fix prices or mandate production or rationing.
Replace oil with interet rates and this could have been wrote by Ben Bernanke. Government price manipulation leads to problems and repeatedly fails. Typically governments become more authoritarian when the price and economy manipulation is failing.
It looks like drawdown's been going on at 1 million barrels per day since March, in the name of bringing down gasoline prices. Curiously enough, another approach to doing that - limiting exports - got no traction or interest whatsoever. Here it's important to note that the 1970s-era ban on crude oil exports was lifted cooperatively by Democrats and Republicans in 2015, and the USA is now a net exporter (apparently most imports are crude oil, and most exports are refined products?).
For an open-access report on this situation (Sep 7 2022):
Meanwhile LNG exports to Europe seem to be running at full tilt, and oil major profits have never been higher. Seems like the war is delivering to Wall Street as hoped for (although Russian oil money also seems to be flowing in full-tilt, so?).
Global commodities markets are dominated by players most people have never heard of, who often pay much more than banks. Wall Street has very little to do with the current state of energy markets.
As I understand it, most US refiners in the gulf region are tuned for heavier/sourer crudes than is produced domestically. I'm not entirely sure why that is (maybe a historical artifact due to prevalence of those grades in Latin America?), but the result is that we generally want to import crudes for refining.
Which is to say: the light/sweet crudes produced domestically are not the ideal feedstocks for our refiners, so restricting exports of those wouldn't necessarily increase supply of refined products.
I think they are tuned for mixing heavy dirty crude from places like Venezuela with light clean crude from Texas. It’s the best way to leverage Venezuelan oil (without mixing in higher quality crude, refining is very difficult).
Maybe that’s why they wanted Keystone XL? Since Venezuela is basically out of commission, use Albertan oil instead?
The SPR was set up as an emergency reserve. Not to manipulate the market price, which is only a temporary reprieve anyway. As soon as its exhausted and the supply issue is not addressed, we will likely be in the same boat as before without the cushion in case of a true national security emergency.
The SPR was created during an era when the US was an oil importer, fundamentally dependent on foreign supply. That’s no longer the case, thanks largely to the shale industry. So the national security calculus is completely different: instead the SPR is mainly an economic tool designed to buffer our economy against global price shocks during times of foreign turmoil, which is exactly the use-case it was just put to when Russia invaded Ukraine and global prices spiked. It should be refilled now, absolutely. But it is not a matter of national security anymore.
If done right, I don't see what's wrong with it. A dozen weeks back, oil was 120, now it is less than 80. We should be able to fill it back and make money while doing it.
We did the same thing saving GM more than a dozen years back.
Is there any meaningful difference between "achieve a lower market price for oil" and "alleviate oil supply shortages"? If the SPR is not intended to alleviate oil supply shortages in a time of war, what else would it be intended for?
Think about what has happened in the past nine months. Russia, the country with the most nuclear warheads in the world, invaded its neighbor, where it proceeded to systematically torture and murder unarmed civilians, filling mass graves. Russia simultaneously threatened to invade members of the European Union and the NATO alliance, while threatening to use its nuclear weapons against any country that might dare to assist its victims in defending themselves.
In other words, there is a war in Europe, where the aggressor is one of the world's largest energy producers. How is this not the kind of "true national security emergency" (as you put it) that the SPR is intended to address?
It's worse than that: once we start refilling it we bring back all of the demand that releasing oil from the SPR kicked into the future.
It follows that if either 1.) demand drops or 2.) supply increases the refilling will create exactly the same problem in the future that releasing oil from the SPR was supposed to solve.
> It's worse than that: once we start refilling it we bring back all of the demand that releasing oil from the SPR kicked into the future.
Translating this into HNese, your argument suggests that disk drive caching shouldn't work. The answer is you can fill your reserves at a much lower rate than you empty them, taking advantage of many small windows.
It will set a floor on oil prices, keeping them from going as low as they otherwise would have. Some have argued that this is a good thing, since it will help to stabilize the "boom/bust" nature of the industry -- guaranteeing that oil producers continue to invest in expanding supply.
To what end? The EU is no closer to oil independence and the Ukraine War looks no closer to ending with Russia’s mobilization.
There’s an election coming up in a little over a month for a president’s party who is historically unpopular. Everyone in this thread assures me that they hadn’t even considered the possibility that the SPR was used to buy votes, even though it looks like that’s the only tangible outcome of this since no strategic goals are being met.
Perhaps we got a good deal on the open market. Even if so - to what end? Temporarily depressed gas prices have yielded no significant strategic victories. Once prices rise again during the winter, we’ll be back to square one without the SPR.
Russia's actions have shown that it is not a reliable partner, and the "cheap" energy it sells actually comes with a very high political and national security cost. As a result, most European countries now know that they must realign their energy policies and economic relationships.
This kind of re-alignment takes time. By opening up the strategic reserve, Biden has given Europe more time than they otherwise would have had. Hopefully, it will be enough.
Western Europe has known this for decades and did not care. Germany used the past decade to decommision nuclear power and coal power. This was not a mistake and US taxpayer oil reserves should not be used to bail them out because they knew what they were doing.
Although it does benefit Europe, it also benefits the United States for Europe to finally turn away from Russia. Germany's prior willingness to engage with Russia may have been purposeful on Germany's part, but it was against the interests of the United States. The United States is not "bailing them out", but is instead making it economically possible for Europeans to align themselves with our own national security interests.
The alternative is for Europe to abandon the fight in Ukraine. This is something that the US taxpayer should be willing to pay to avoid.
Gas prices go up, everyone gets mad. Dude adds supply to try to lower input prices, everyone gets mad. Conclusion: some folks were born mad and are gonna stay that way regardless.
It is a survey by https://mclaughlinonline.com/
They are clearly hyper partisan, but being charitable that should be fine, we just need to see what exactly the survey methodology is, I can't find it. Wonder why.
Or its just obviously nonsense and we can ignore the crazy person?
It's a pointless strawman anyway. He's clearly not the one making the decisions, so it doesn't matter if he's sane or not. A big chunk of his cabinet is equal to Obama's as well. And before you come in with "but Trump did X". Yes, Trump was an idiot as well. Different people can be morons at the same time.
This is the first time your hearing that people want him to take a cognitive test?
It comes up in almost every one of the (very rare) times he talks to the press. I guess that means the strategy is working. That’s kind of frightening to be honest.
I’m curious if you just don’t follow political news?
The Biden campaign, and subsequently administration’s policy has been extremely limited press availability. Biden has for most of his political career been a known gaff machine; he is a compulsive liar, and will essentially make up stories on the spot which are false. He’s been doing this since the 1980s. I don’t mean this to sound like a partisan attack, and I know it sounds like that to a non political news junkie. Before you make that assumption just please google it. However in the last few years this has gotten extremely bad to the point where many even within his own party have been calling his mental faculty into question.
Anyway, the fact you didn’t know this seems to indicate that the stately of restricting his interactions with the public is working.
Honestly I can’t even remember the last time he had press availability. Was it right after the Afghanistan disaster?
He does give pretty frequent “remarks” where he’ll post some prepared speech that he reads, but that’s usually it. That’s not what I mean.
And honestly: I just don’t get where you’re going with this. Bidens mental decline isn’t even a partisan thing at this point is it? Even his own part seems to be indicating they don’t think he could handle another campaign.
(We should stop this convo though since it’s just going into politics crap now)
> Bidens mental decline isn’t even a partisan thing at this point is it?
Unfortunately, it very much is a partisan allegation - one I find poorly sourced.
> Bidens refusal to engage with the press has been a constant frustration
From your source:
>> The one measure where Biden has outpaced the men who came before him is in informal question and answer sessions – of which he has done 216 compared with 120 for Trump and just 46 for Obama.
That doesn't scream "mental decline" to me: informal Q&A's are less structured and more mentally taxing (broader topics, so coaching & prep don't help as much). In the clips I've encountered, Biden sounds very lucid, and very off-the-cuff.
Maybe "squandered" would be a better choice of words then. Anyway, the point is that there wasn't an actual oil shortage; prices were just high enough that it was making the government look bad. Releasing the oil only served to temporarily and artificially drop prices.
Assuming US can print any value of USD out of thin existence as they have done multiple times in last 20yrs, it doesn’t matter for them whether they later buy in the oil to fill the reserve back at 40$ or 400$.
Key issue here is that we are seeing hard assets especially commodities being repriced in USD after a steep cycle. The winner here, as always are gulf countries flushing with cash as they are the real owners of the hard commodity assets. And the losers are developing and emerging market economies with poor FX reserves (as we have seen with Sri Lanka, Argentina etc). Pakistan could save 2.26B rupees since last April by trading oil in rupees instead of dollar [1]. The real monopoly in this world is USD hegemony and it’s once again developing economies who will bail out the monopoly paying steep prices for import.
I want to offer an alternative to a couple of commentators bringing up inflation rates:
We have identified a real-world, physical problem (look in the big tank, no oil).
The proposed solution here is - and I think this is a fair paraphrase - "well we can print money and people will trade oil for that".
This is an almost absurdly high-risk assumption. Financial solutions might just not work to fix physical problems. That sort of plan is pretty close to an endgame where the US will collapse because it no longer has the energy to sustain complex society. If there is a day where the US needs the strategic reserve - which we haven't seen yet - money will not solve the problem. That is, in fact, the reason why there even is a strategic reserve instead of a JIT strategy.
The accountants might recognise it through inflation or some other metric, but attempting to execute this plan could literally involve hitherto unknown catastrophe in the US, like being invaded or mass starvation. One of those things that is supposed to happen only in other countries.
I think you are mistaken with how long before this is going to happen. Europe is already experiencing the effects and this winter will feel the full effects of this. The US is probably got a bit more time... but Russia, China, India, etc are working on bypassing the US Dollar for their trade, reducing the amount of trade that occurs in US Dollars. As for reserve currency status, the politicians have also made the US dollar more unfriendly when they froze the Russian Central banks reserves. This will result in other countries reconsidering where they store their wealth.
If your solution to USD being restricted is to trade in CNY you‘re in for a rude awakening.
CNY does not freely flow across the Chinese border, and the government will not hesitate to put strict capital controls to limit inflows and outflows. The government knows that this prevents it from being used as an international reserve currency, but they would rather keep stability in the Chinese economy.
What exactly do you mean by "flow across the Chinese border"? It's my understanding that all electronic USD are in the USA, either directly in the central bank or indirectly through another bank which has an account in the central bank. They can't actually flow out of the country, except as cash.
China controls the use of CNY to buy non-domestic things, particularly foreign exchange. Domestic companies and savers‘ “movement” of the currency is tightly controlled, and the government has immediately tightened the screws on everyone before.
USD is not controlled in this manner, which makes it pretty easy to obtain. One of the important features of a reserve currency is easy obtainability and convertibility, but this runs counter to China’s internal stability goals.
Digital Yuan are currently not approved for international use. And they seem to be subject to the exact same Chinese capital controls that traditional CNY are subject to, if I’m not mistaken.
Except there is plenty of oil all over the world flowing, and sellers eager for USD. The “big tank” can be filled still, with an endless supplies of USD, and it’s no where near empty now.
The bigger issue IMO is that over the last couple elections we’ve seen politicians trying to buy votes. Trump cut taxes, then delayed their payment, then wrote stimulus checks, and now Biden forgave student loans and is spending US oil reserves to keep gas prices low until *checks notes* November.
That has been true for decades it might not be true right now - otherwise why is the US running down its strategic reserve?
Obviously the Americans don't believe they can print money and exchange it for oil - or they would do so. Paper for oil is a much better trade than running down the strategic reserves. Their relationships with a lot of the top 10 oil producers range between highly competitive to low-intensity war.
ostensibly this is what's going on. when citizens and corps receive stimulus or other breaks, they buy petroleum products that floated over on a petroleum powered barge, were driven to a hub by a petroleum powered intermodal freight transport, trucked via petroleum products to the retailer where the consumer drives a petroleum based and often still petroleum powered vehicle to go and make their purchases of petroleum made plastic products.
Petroleum is in everything. If you print american dollars, it will eventually end up purchasing petroleum products many times over in the lifetime of those dollars, whether they be paper or digital.
> otherwise why is the US running down its strategic reserve?
Because it keeps domestic oil prices low which keeps an electorate happy. The government can’t force OPEC to pump more oil at a low price nor can they set prices, but they CAN increase oil supply on the market through reserves.
That sits in conflict with the idea there are lots of people who want to sell the US oil though, does it not? They don't. The US dollar isn't exciting enough for them to go out and pump oil. It isn't obvious that the US firing up the printing presses would suddenly make them excited at the thought because it isn't like that gives them a better deal. The US has the same capability to get them goods, services and assurances before & after the printing.
And unless the electorate are very stupid (an option, I suppose) they will note that at some point they will be paying even higher prices if the SPR is refilled. It'll be even worse than it would be right now.
> They don't. The US dollar isn't exciting enough for them to go out and pump oil.
They do, in fact, pump oil for US dollars right now. They obviously have an incentive for prices to rise, and they’re a cartel. OPEC colluded to raise prices.
Of course, we also have treaties that say when the do sell their oil it’ll happen in USD.
> they will note that at some point they will be paying for even higher prices
Yea but that’s ok when it’s not an election year and inflation isn’t raising other expenses. Or, just play chicken and hope that you can last until the next political party takes office, then they look bad for raising prices.
> it will be even worse
Not if it’s done slowly at a time when the demand is lower or supply is higher.
Ummm, have you been reading the news this past year? Maybe any other time in the last 20 years the US could print money without worry, but the federal reserve is currently trying their best to reduce the money supply to fight run away inflation.
America's option to print it's way out of economic crisis will not be available again until inflation is under control
The Fed is trying that for now, but even they know it's not going to work. Inflation today is mostly caused by goods supply issues (supply chain, Europe's energy crisis because of tensions with Russia, lingering impact from Covid on manufacturing), not monetary policy.
Of course it's going to work, regardless of the reason for inflation. Lower demand and prices will come down. Neutral stance monetary policy is meant to grow the supply of money at the same rate as the economy grows in the long run (+2%), so if there is inflation beyond that it means the money supply is growing too fast for the capacity of the economy to produce, even if that's due to other reasons. Neutral stance monetary policy does not live in a vacuum and the target never stays the same, so I don't know what you mean by inflation is not caused by monetary policy. It's monetary policy being run incorrectly for the circumstances.
> It’s the covid era monetary and fiscal policy that screwed us.
Citation needed ;)
But maybe it’s both. And maybe it’s complex. Maybe we’ll never know.
Housing prices and liquid asset prices seem very correlated to covid lockdowns amount wealthy people who couldn’t spend and 0% interest. Much of that asset pricing has reverted now. But stimulus checks and other often cited welfare benefits went mostly to grocery stores and supplanting income that was lost.
The rise in consumer goods prices is due to supplies chain issues like a war and sanctions on an oil producing nation and (my hypothesis) a desire for businesses to raise prices to raise profits to account for declining stock price and changing post pandemic spending patterns.
Is it just a coincidence then that the rest of the world is experiencing the same (or worse) inflation? And do you think the shortages of things like computer chips, and the increase in price of natural gas because of Europe's new imports have no effect on prices in the US?
That was exactly my point though. The way you “fight inflation” is you raise the rates and that means all currencies pegged to yours must raise their rates at the same pace no matter what their economic conditions are like or they get destroyed in FX market. Look at right now EUR, GBP or YEN. The way Fed fights inflation is nothing but rest of the world (mostly developing world) pegged to your dollar monopoly bailing you out. And that inevitably requires hard commodity asset repricing.
It's very simple, the US did the most easing due to the "exorbitant privilege" and so has the strongest economy coming out of the pandemic and so it can afford to raise rates the most and so it exports its inflation to other countries via the FX market.
Europe is having massive inflation to (also did quantitative easing), so of course if the US tightens rates the EU would have to tighten as well to maintain exchange rate parity?
It has nothing to do with US dollar dominance, this interrelationship also happens with non-dominant currencies as well.
Agree Europe is a different story altogether- their currency free fall against Dollar is more to do with the mixed signal ECB is sending by still having to buy Italian and Greek bonds that find no other buyers AND at the same time trying to do a rate hike. And that is at the backdrop of a cold nuclear (potentially) winter.
> It has nothing to do with US Dollar dominance
Say that to Sri Lanka, Bangladesh, Pakistan, Iran, Argentina or literally any other developing currencies out there.
> Assuming US can print any value of USD out of thin existence as they have done multiple times in last 20yrs
The US doesn't do that. You're probably confusing the increase in the US debt with money supply. So long as the economy grows (as it has over the last 20 years) then the debt is not a problem
Everything goes up forever until it doesn't. Japan hasn't recovered from highs like 30 years ago.
One reason foreign debt may not matter is because when you have the most powerful military in the world, some of the most fertile land (food), natural barriers (defenses), and cultural hegemony (arguably America's real export, and English is like a virus) who is going to make you repay it and how exactly?
> who is going to make you repay it and how exactly?
people are used to thinking of personal debt which they need to repay.
Corporate debt is not repaid, the %age is considered part of the "capital structure" of the company. It's a type of ownership, equity holders own the frothy top of the company, bondholders own the underlying assets at the bottom. As corporate bonds are repaid, new bonds are issued, renewing the debt. The fixed %age interest payments on the debt are a cheap way for the equity holders to increase their profits.
Government debt is more in the category of corporate debt, repaying it is not part of the plan, the goal is to move future spending into the present for long term infrastructure projects, etc. And as long as the economy grows so the debt percentage stays manageable, it's not an issue.
Companies who roll their debt are about to hit a world of pain. The US treasury interest rate dictates just about all other rates, and it has more than doubled since its lows.
All of the folks decrying high corporate profits are about to get their wish, as interest and inflation will begin to eat into those profits.
At least, that’s my guess as to how the next few quarters play out. Who knows what happens afterwards?
As for governments being somehow immune from the physics of economics, I’m a skeptic. It takes longer for government-scale economics to play out. It’s like climate change in a way. My guess is it’ll play out, and we won’t like the consequences, but it’ll be too late to fix things by the time we’re really grappling with them. We’ll know who’s right in a few decades.
What are the chances that this is a 4D chess move, where the US government is confident we are heading into an almighty recession soon (because they basically know from their contacts at the Fed that they will not stop hiking interest rate hikes for a while), and so is dumping its oil at a high price from which they intend to refill again in the midst of the recession when it is selling at a discount?
This might also explain why they are intentionally selling it to China. Beware of Greeks bearing gifts.
I agree, but I am trying to give them the benefit of the doubt here that they are not just stupid or political opportunist with the country's national wealth. So I am offering a reason why they might sell it for some 'smart' reason rather than just political gains prior to mid-election.
Also you can argue that the amount of reserve to hold should always be a function of how much you are forecasting future demand, so if you know with high level of certainty future demand will crash due to a recession, it might be sensible to reduce reserve.
Embargoes and import bans cause recessions too, and they are precisely what the SPR was meant to address. The US needs a multi-tier solution, short medium and long term. Recession only is a medium-term solution and not even the best. SPR is supposed to be the bridge to get you there and save you from worse. Perhaps a better solution would be a reserve of mothballed energy projects and equipment that can be spun up on 6 months notice or a year, not that in this political environment it would have helped.
Seems like a pretty strong headline for saying "USA still has 400 million barrels in its strategic oil supply".
We had 600-million before the Russia-Ukrainian war, and we have 400-million now. That's a big drop, but this isn't "lost" by any stretch of the imagination.
> The Fall 2022 call for bids to purchase 60 million barrels will specify the volume and type of crude oil that SPR will purchase. The future delivery window will be based on anticipated market conditions factoring in when future oil prices and demand are expected to be significantly lower, likely after FY 2023. In addition to securing contracts for future delivery to refill the SPR, this replenishment structure also will help encourage the production we need now to lower prices this year by guaranteeing this demand in the future at a time when market participants anticipate crude oil prices to be significantly lower than they are today.
So the DOE has traded the 2022-2023 spread in the futures market and made a killing. Anyone who's talking about misuse for political gain doesn't seem to appreciate that the refill has been guaranteed since this whole thing started. This was extremely prudent use of the SPR. Also, they sold oil to China at massive premium.
For the record, I am not a Biden fan, and I'm currently flat on an oil trade precisely because I thought they'd screw this up.
So USA uses 20m barrels per day and the SPR holds 700m at it's peak, or just over a month of reserves. On the other hand barrel production has tripled to 15m barrels per day from 20 years ago. The headline is a bit sensationalist...
If now wasn't the time to use the strategic oil reserve when exactly was? Now that oil is much cheaper it can be re-filled for significantly less than the contents were sold for, netting a large profit while also serving its purpose.
> If now wasn't the time to use the strategic oil reserve when exactly was?
the strategic reserve is for times of national defense. As long as it's lowered, we are more vulnerable to expanding threats from Russia and China, with potential disruptions to supply lines.
Otherwise, it's good for our oil prices to fluctuate with the market, things cost what they cost.
The strategic reserve is so we have ready access to oil at any price; it's not big enough to buffer very much of world market consumption.
It’s for fueling fighters tanks etc during a war, not scoring points pre-midterm. Pretty important considering Russia and China’s brinksmanship these days.
I think the current sanctions against Russia are misguided. Yes, we want to support Ukraine, and certainly we should not export weapons or semiconductors.
But I can't follow the argument that petrodollars would help Russia that much. Before and since the 2014 annexation of Crimea, Russia has exported oil/gas without restrictions.
Yet it has been unable to build up an army that can proceed much more than 50 km in Ukraine. IOW, the petrodollars have not helped at all.
Now we are buying LNG via China and ship it to Europe using polluting ships. We are destroying our economies for no reason. Use targeted sanctions and let the elites in Russia embezzle the petrodollars and buy stuff that can't be used in the war (Ferraris etc.).
Lol moral compass. How much of our economy are we expending to protect Palestinians? Or rebuild Iraq after we massacred one of human histories most storied civilizations for no reason? Where are the morality reparations?
Americans invoking morality in their entirely political defence of Ukraine is such a joke.
Counterpoint, since the US is now amongst the world's largest exporters of oil. Is a strategic reserve important? Wouldn't a more prudent action in time of need be to redirect exports to the needs of war?
Would it be weird for Saudi Arabia to have a strategic reserve?
Hmmm; is that the same strategic oil reserve that Australia struck an agreement[1] to supposedly have access to? I guess we'll have access to it when no-one needs it, but when the pinch comes...
Note that it is mostly Sour oil that is being moved off the SPR. Because that is the more useful type. So you might consider that 200-250mbbl of Sweet oil in the SPR is less-useful and counting the whole 400+mbbls is like counting apples and oranges together and saying you have X amount of fruit.
Note the gradient, rates and the fact that two thirds full is a return to the state of things in the 80s - it is conceivable that it will be empty next year. Although whether it is likely is a political question.
Check out the Ontario grid. 91% zero-carbon. [1] Quebec at 99%. [2] It's hardly a subsistence lifestyle up there. You've just got to, you know, execute on it. This accounts for 60% of the Canadian population.
Ontario and Quebec are relatively small populations on the world scale. The per capita usage may be high in those provinces but the overall generation required to meet their needs is still relatively low.
Also, hydroelectric dams are not necessarily viable everywhere.
Ontario + Quebec is about 60% the population of California too, and most of Ontario is powered by three nuclear power plants: Bruce, Pickering and Darlington.
The question was 'is it possible' and 'is it sustainable' - it sure is. Even if some so-called environmentalists would rather run coal and oil and natural gas plants in lieu of the safest and lowest-carbon energy we have: nuclear. A 'subsistence existence' as parent called it, it is not.
That's all hydroelectricity - that's not a form of renewable energy that can scale to the whole planet (and virtually every suitable river for it has already been exploited).
You and others are missing all the network of hydrocarbon based energy that allows you to survive, farming, mining, transport etc, your electrical grid is only a portion of a world wide system built upon on tap energy. The weather will never ever be an on tap energy source.
Transport and mining can be electrified and will probably in time.
Farming at our scale will probably continue to require oil as an input, and that's just fine. Same with certain kinds of manufacturing, etc. Once we stop setting it on fire we'll have a lot more for these purposes and it should be significantly cheaper.
Wind, solar, hydro and nuclear can absolutely handle our non-farming needs.
It will still contribute to our lives and lifestyles sure, but much less.
This is great on an individual level for those that already have an exceptional quality of life as a safety net. Unsustainable for everyone else.
Some counties can't even keep a barnes and noble open . Today, I saw a grown man pants-down shitting in a raised concrete garden planter, feet still touching parking lot. In one of the Top 10 Happiest Cities in the USA (TM).
Yet the entirety of CALIFORNIA will sustain 100% renewable energy. HAH. They will sustain a 100% interest in the politics and policies surrounding the journey to renewable energy. That much is certain.
60% of Canada's population ordinarily runs on 90-100% zero-carbon power. About 24M people. All of Ontario and Quebec. It's really not that big a deal. Not sure what that gentleman's choice of pooping in a planter has to do with the electric grid unless they were like a PG&E employee or something?
[edit] refurb: 3 power plants, not 12. But of course yes it's a question of priorities. It's very doable.
"Why doesn't a car company just come out with a new car only focused on performance that i can fix on muh easement and none of this expensive safety or emissions stuff"
They can't even do it at 1% of cars being electric without rolling blackouts. The bush-shitter is completely relevant. Who will maintain this 100% renewable electric grid, scale unknown? Forever? Maybe him if that was actually the way California was headed. No, he can just get 600$ a month to shit in bushes instead.
Who pays for the existing electric grid? Or petro infra? California has horrible fires, the gulf has terrible floods, etc due to climate change. We’re not pricing in the full cost of oil externalities because it comes in the form of emergency budgets and aid instead of monthly maintenance bills.
Beyond California, other states are modernizing their grids. Massachusetts is trying to build massive batteries to sustain themselves when in need (they don’t have any native source of energy), while generating supplemental carbon free energy.
It’s sustainable to maintain because it’s less problematic and more resilient and has less externalities. A California where everyone has solar and a battery is a place where the grid demands are smaller (because energy is produce where it’s needed, not transported). It’s a place resilient to crisis (weather, attack, failure, etc) again, because production is localized. Electric cars use more electricity of course, but you’ll save money by not maintaining any petro infrastructure. California can handle their electric cars just fine.
Also what’s up with this attack on some poor bush shitter? Getting paid to shit in a bush? I don’t know what that’s about but thankfully $600 a month is a lot smaller tax burden than most rural Americans who might complain about him are.
But just want to point out the WSJ definitely has an axe to grind in this. They're anti-Biden and want highlight how terrible this all is because it's being done by Biden.
As another poster pointed out, he Russell conjugates and uses the word "Lost" versus "Spent" (fighting inflation).
The chart in the graph has an axis that starts at a non-zero level, the first trick in statistical persuasion.
The article catastrophizes by saying things like "for the first time it's lower than commercial stockpiles". Wait why is commercial stockpiles even the relevant reference level? Shouldn't there be some first-principles analysis of what is even necessary? Is the "safe" SPR level way lower for the USA today because the USA is a net exporter? None of that analysis.
Didn't he also suggest paying oil companies to keep in the ground and call it a strategic reserve and gifting oil companies the storage space in place of actually topping it off? A stopped clock is right twice a day.
I believe some parties actually considered the money billions of money paid to bail out the oil industry and opposed it on principal.
He didn't fill it, and he sold off a lot more than he bought (particularly around 2018, when oil was near a local max). He started buying in 2020. He wanted to fill it, but ran out of money in that part of the budget before he could, and Congress did not want to raise it.
Why would U.S. need this storage at all today when it is energy independent and is a net exporter of all main kinds of fossil fuels? This is a legacy of Nixon era when U.S. depended on Middle Eastern imports that could be cut off anytime.
Don’t crude oil and associated products lose their potency over time? So emptying older fuel out of the reserve sometimes is a good thing so we don’t need to stabilize it with whatever the scaled version of Sea Foam is?
Have we tried nationalizing coal, oil, and gas, and having a democracy so we don't get any more local coups from the financial hegemonic masters of said resources?
I said democratic, so yes, Venezuela. Seems like the #1 undisputed world's largest oil reserve country would do absolutely fine, if they weren't actively under NATO embargo, using military force to prevent trade in their entire global hemisphere, so gullible Americans can't spout nonsense like this and form political identities from it.
Here's something nobody talks about (probably because this is a rule I came-up with after analyzing relevant factors):
Our ability to rapidly expand renewable and nuclear energy generation is
inversely proportional to the cost of oil.
For the mathematically-challenged this mean: If oil is expensive we cannot afford to expand renewable or nuclear energy production fast enough to meet stated goals.
Why?
Because everything related to the manufacturing, transportation, construction, operation and maintenance of these power plant has the cost of oil as one of the important cost-driving variables.
Normally people think "fuel" when they read "oil". Making this assumption would be very wrong. Yes, of course, the millions of trucks and cars needed to engage in construction projects at a national scale are all powered by gasoline or diesel. That is a major cost-driver, no doubt about that. However, there are untold numbers of oil derivative products --from lubricants to plastics-- that also come into the equation.
This is where things turn weird and a second rule is necessary:
In order to be able to support rapid transition to renewable energy sources
and electric vehicles we have to support and demand ultra-low oil prices.
At current oil prices, the US and Europe simply do not have enough money to fully electrify their entire transportation infrastructure. It is hard to run the numbers on something like this due to the element of time and complex geopolitical forces. My ROM (Rough Order of Magnitude) estimate is that the US would have to at least double it's foreign debt in order to be able to build the infrastructure required to be able to support 300 million electric cars (full electrification).
We have to double our power generation capacity and also more than double our ability to transport it (the "grid"). That isn't trivial. We can barely get a high speed train built in California after a hundred billion dollars and now we are talking about doubling the entire power-generation infrastructure for the entire country.
This is what is lost in conversations and politics that are ideologically-driven to such extremes that we end-up not being able to move forward.
The third rule would be:
We have to have a plan and solid execution.
The above makes no sense unless we have a solid plan and execute better than our dismal record for the last several decades. I refer, one more time, to the ridiculous high speed train project in California. Such performance should result in people losing their jobs and maybe even some suffering legal consequences. Yet, that never seems to happen. If that's the best we can to, forget about it. We can't build anything at scale any more. Just look at how many problems Tesla is having just to build battery factories in the US and Germany as an example. Now multiply that by, I don't know, a million, to get a sense of how much better we have to be about these things.
To simplify:
We need a solid 25-year plan to migrate to renewables and nuclear at scale.
Specific project with specific timelines and realistic objectives.
During that time, we need super-cheap fuel and derivative products in order
to be able to pay for the migration.
More importantly, we need to develop and enforce a culture of solid
execution, without which we might as well give up.
In my opinion, without this the dream of migration to a clean electric-powered future within our lifetimes is a fantasy.
Oh yeah, last rule:
No, solar alone can't do it.
We need nuclear. Lots of it.
The excess supply was meant to carry America through supply shocks. You can argue it should have been portioned out slower, but the current high prices seem like the kind of supply shock the strategic oil reserve was meant for.
The Energy Policy and Conservation Act [1] which started the SPR says:
> SEC. 2. The purposes of this Act are—
> (1) to grant specific standby authority to the President, subject to congressional review, to impose rationing, to reduce demand for energy through the implementation of energy conservation plans, and to fulfill obligations of the United States under the international energy program;
> (2) to provide for the creation of a Strategic Petroleum Reserve capable of reducing the impact of severe energy supply interruptions ;
> (3) to increase the supply of fossil fuels in the United States, through price incentives and production requirements;
> (4) to conserve energy supplies through energy conservation programs, and, where necessary, the regulation of certain energy uses;
> (5) to provide for improved energy efficiency of motor vehicles, major appliances, and certain other consumer products;
> (6) to reduce the demand for petroleum products and natural gas through programs designed to provide greater availability and use of this Nation's abundant coal resources; and
> (7) to provide a means for verification of energy data to assure the reliability of energy data
So it very much is about ensuring supply and and price stabilization.
Citation needed. Naval reserves[0] were mostly privatized years ago, and to the best of my knowledge, none of the other branches have ever had them.
We have less need for the SPR today because we produce so much, and thus the "supply shocks" it was created to prevent can't really happen anymore—certainly not at the same level as the 1970s.
Prior to Biden draining it this year, Congress had already approved dramatically reducing the SPR by 2030.
Are you going to peel off the "I did that" Biden stickers from gas pumps now that the price has come down or are you going to let Biden take credit for it?
When you have a huge oil storage facility, you can make a lot trading spot crude. The strategic oil reserve has historically done very well trading the oil markets.
The point of the oil reserves isn’t to nick a couple cents off gas prices shortly before an election, it’s to provide a buffer of raw petroleum in case we go to war and the source pipelines and supply chains get hit.
The real waste of resources was the Democrats refusal to allow topping up the strategic oil reserves when the spot price collapsed in 2020. As a country we would have been mote secure for the future and the localized impact could have stabilized prices.
The oil reserves are not serving the purpose of controlling oil prices. You would need a truly astronomical amount of reserves to control the market, which isn’t exactly the best way to use your nations wealth. Buying more during the dip would not have changed the current situation.
Which is why, the only feasible solution to controlling oil prices is to change it demand side. Oil does have legitimate uses for eg military, petrochemicals etc. but most of it is just burned away.
Layman here. As I recall that dip was actually negative prices because no on could take delivery. Was there actual spare capacity to store more oil at that time?
Yes, in the strategic oil reserve there was, but not in many other oil storage facilities, and government buying processes for everything are slow and complicated. However, the negative prices aren't for oil as delivered where you want it. It is for oil coming out of a tap at a storage facility somewhere in Illinois (or rather, entering a tank that you rent in that storage facility). All of those tanks were full when oil prices went negative, and there wasn't enough demand to transport oil out of that facility. Most storage facilities were full, and new ones couldn't be built in time.
Buying the dip would be a cost effective way of maintaining our insurance policy. Buy low, sell high. We had saved cheap oil for a hurricane and released them for a light drizzle in order to try to cap gas price increases, which have more than doubled from one president to the next.
> still sold on the bs american dream of being stuck all day in a metal box instead
As opposed to what, being stuck all day in a larger metal box with dozens of others?
The quality of life solution is to kill the commute, not to kill cars in favor of transit.
Mixed-use zoning, housing policy that makes moving easy instead of extraordinarily expensive or impossible, and remote work -- these should be the focus. Transit is great for the environment, not so great for "being outside and enjoying the real world with other humans".
If public transit was significantly expanded and given priority over personal transport, it would significantly reduce trip times by massively reducing road congestion for simple geometric reasons. Not to mention, cities designed for not having cars are inherently less prone to congestion as housing, commercial and business areas are more interspersed (instead of everyone moving from the suburbs to downtown and back every day).
> If public transit was significantly expanded and given priority over personal transport, it would significantly reduce trip times
That’s the theory, but I think the reality is “induced demand” — the same reason expanding freeways from 5 to 10 lanes doesn’t reduce congestion.
Metro areas with transit don’t have shorter commutes time-wise: the average commute in large metros in the US is about 25-35 minutes across a huge range of densities and transit concentrations.
Why? The typical argument is that people often want more living space, or cities zone such that housing below a certain threshold size is illegal (and thus the smallest unit you can rent/buy has an inflated price), and residents move far enough that they can afford to live — often, their commutes are 15-30 minutes. Then, they change jobs, but often can’t move closer — because they can’t take their rent control with them, or their property taxes will spike, and the deal with a longer commute. Or, they have kids and need an extra bedroom, and move to the suburbs for the same reasons.
> cities designed for not having cars are inherently less prone to congestion
and you're still stuck in a confined space with all sorts of vibrant urban characters. not just you, but your mother, wife and children are too.
having a car to avoid that alone is worth it. I suspect the recently sprouted anti-car evangelists are genuinely unaware of the big city public transit experience. nobody in their sane mind would preach it otherwise
Cheap fossil fuels aren’t primarily about providing fuel for personal vehicles to go from exurbia to the city and back. That’s like saying that the agricultural revolution was about growing garlic at home.
Can’t take an EV on a road trip. It would make it 3 times as long. And there are no convertible EVs. So I’ll think I’ll keep my oil burner which does about 12mpg, top down while I blast AC on my feet.
Attach diesel generator on trailer, and charge it while moving. Some EV cars use electricity from coal or natural gas, there is no difference...
Or skip battery, and use electricity from generator. It is called diesel-electric and is reliable way to produce EV vehicles. Well tested on cars, trains, tanks, boats even submarines...
Please go look at a price chart. It will tell you volumes more than whatever late stage narrative is being pushed. Wall Street has been shilling "the SPR might go to zero" narrative since January.
The SPR was filled to the brim during the COVID crash by the Trump admin. This was at record low (negative!) prices. The SPR was released during this recent price panic by the Biden administration mostly near all time highs $90-120. They plan to refill the SPR at current prices. Crude is now $78.
This was an incredibly good trade. We're talking 300-400% price appreciation here. Even if the US government was selling SPR crude to China, they sold it at a massive premium and will buy it back at a lower price.
What's even more interesting is that the futures market had predicted this trade existed in the futures market even when oil was trading at $120. Refilling the SPR at a lower price was guaranteed at the time of release.
Not a huge fan of this admin overall, but they navigated this crisis far better than I thought they would.
> Trump announced his intention to fill the U.S. Strategic Petroleum Reserve “to the top” on March 13 [2020] as global oil prices went into freefall amid the coronavirus outbreak as governments issued stay-at-home orders that have obliterated fuel demand.
An emboldened Russia started a war of conquest, drastically reducing supply. Though honestly there's plenty of effects from the coal market started by China's big moves, so it can't all be places on Russia. And Russia was going to do this at some point, it's been inevitable since their 2014 invasion, and also how their prior invasions and involvements have had almost zero pushback.
The pandemic made oil drilling + refining look like a bad investment, so the industry underinvested in new oil resources. Then Putin cut the oil and gas supplies to the world in an attempt to extort Europe into standing aside and accepting his conquest of Ukraine.
In addition, there was an explicit push by the Biden admin to make drilling less profitable (less permits, increased oil royalties, increased investor reporting requirements, and a PR push). It's not politically useful anymore - even the admin can't continue this while sanctioning Putin for his war of conquest - so people pretend it did not happen.
If they ever convert all the coast-to-coast tractor trailers out there to hydrogen, all the major city buses to hydrogen, maybe local deliver trucks too, how much petroleum would that save? Can't find an easy answer.
