Tell Me Again Why We're Doing This? -- January 26, 2017

US expected to begin selling crude oil from the Strategic Petroleum Reserve this month. Really?

Link here.

Yesterday (January 25, 2017) the U.S. Department of Energy's (DOE) Office of Fossil Energy awarded contracts for the first of several sales of crude oil from the Strategic Petroleum Reserve (SPR).

A Continuing Resolution enacted in December 2016 included a provision for DOE to sell up to $375.4 million in crude oil from the SPR. This sale will be the first of several planned sales totaling nearly 190 million barrels during fiscal years 2017 through 2025.

As the largest stockpile of government-owned emergency crude oil in the world, the SPR was established to help alleviate significant oil supply reductions from occurrences such as major geopolitical events, severe weather, unplanned production curtailments, transport disruptions, and delivery outages. Located in four storage sites along the Gulf of Mexico, the SPR held more than 695 million barrels of crude oil as of January 13, or about 97% of its design capacity (713.5 million barrels).

Let's go through that list again:

• major geopolitical events (I guess that would be the election of President Trump; BREXIT talk)
• severe weather (I guess all the winter storms this year)
• unplanned production curtailments (yeah, US producers cut back production last year; OPEC announces cuts in production for first half, 2017)
• transport disruptions (CBR derailments; it's been awhile)
• delivery outages (Keystone XL killed; DAPL killed)

Wow, glad we got that solved. 

The data:

• 2017 - 2015: nine years
• 190 million bbls / 9 years = 21 million bbls / year = 0.058 million bbls/day = 58,000 bbls/day
• SPR storage: ~ 700 million bbls
• By law: SPR must contain 90 days of import supply. Currently in excess of 140 days and has been as high as 160 days as recently

At the end of the day, the dollar amount and the bbl amount is so insignificant this comes across simply as an exercise giving the DOE something to do. No wonder Rick Perry wanted to do away with the DOE.