The Department of Energy announced that only about 1/3 of the offered release from the Strategic Petroleum Reserve sold. With companies’ crude stocks above, well above, last years levels, this shouldn’t be a big surprise. No doubt some would argue that the big reason for the release was psychological. (I’d argue that the psychological help needed by oil traders would require a release from the Strategic Thorazine Reserve.) Actually, in the final analysis it may just be that the SPR was literally in the right place at the right time and what was needed wasn’t a huge amount nationally, but was important locally. With the SPR in Louisiana where production was hardest hit, it was in the right place logistically to help with those supply disruptions effectively. Of course, more might have sold if the refineries themselves hadn’t been hard hit.
But what if the disruptions came from an earthquake in California or a Korean SCUD hitting the Alaskan pipeline? What would be the logistics of
supplying West Coast refineries from Louisiana and Texas. It would have to involve trains, trucks or, since I understand the canal that used to be ours is too small for supertankers, a trip around the tip of South America.
Plans are in the works to expand the SPR to a cool billion barrels. In fact, the money is already at least authorized by Congress, if not appropriated. If the expansion is really going to happen, we need to think about not having all billion eggs in the same basket.
The U.S. Energy Department said yesterday it accepted bids from energy companies to buy 11 million barrels of crude oil, only about one-third of the amount offered for sale from the government’s emergency stockpile to help replace supplies cut by hurricane Katrina.