I thought the recent price drop at the pump was due to Biden dipping into our strategic oil reserve. I read 20million gallons a week. This is really scary because that’s supposed to be used in dire emergencies and we may need it down the road if Putin decides to cut us off?
I thought the recent price drop at the pump was due to Biden dipping into our strategic oil reserve. I read 20million gallons a week. This is really scary because that’s supposed to be used in dire emergencies and we may need it down the road if Putin decides to cut us off?
While Russia is the current largest exporter of oil in the world, Russian oil is not a large component of US oil imports or consumption. And bear in mind that, depending on what the true state of US shale reserves are, the US notionally has the potential to be energy independent.
However, you are correct that the SPR is intended to act as a buffer in the event of an extreme supply shock (OPEC 1973 oil embargo or Iran 1978 takeover by Khomeni), and Biden's program of steep drawdowns is not being matched currently by plans for replenishment.
Still, to the extent that the oil release from the SPR is helping to suppress crude oil markets, that suppression only cuts against the idea of rising energy costs, particularly in costs for gasoline. The extra input volume should be working to lower those costs--which arguably is what we are seeing in the futures markets. Yet if we are seeing that cost suppression vis-a-vis SPR releases, why is the PPI report saying gasoline prices are driving producer prices up?
I thought the recent price drop at the pump was due to Biden dipping into our strategic oil reserve. I read 20million gallons a week. This is really scary because that’s supposed to be used in dire emergencies and we may need it down the road if Putin decides to cut us off?
At the end of March Biden committed to releasing 1 million barrels of oil per day for six months from the SPR.
https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/31/fact-sheet-president-bidens-plan-to-respond-to-putins-price-hike-at-the-pump/
Currently, the SPR inventory stands at ~485 million barrels, which is a drawdown from the most recent inventory peak in 2020 of ~655 million barrels.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCSSTUS1&f=W
Putin really can't "cut us off". The US in April imported ~10 million barrels from Russia, against total oil imports of ~247 million barrels.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTTIM_NUS-NRS_1&f=M
https://www.eia.gov/dnav/pet/PET_MOVE_IMPCUS_A2_NUS_EP00_IM0_MBBL_M.htm
While Russia is the current largest exporter of oil in the world, Russian oil is not a large component of US oil imports or consumption. And bear in mind that, depending on what the true state of US shale reserves are, the US notionally has the potential to be energy independent.
However, you are correct that the SPR is intended to act as a buffer in the event of an extreme supply shock (OPEC 1973 oil embargo or Iran 1978 takeover by Khomeni), and Biden's program of steep drawdowns is not being matched currently by plans for replenishment.
Still, to the extent that the oil release from the SPR is helping to suppress crude oil markets, that suppression only cuts against the idea of rising energy costs, particularly in costs for gasoline. The extra input volume should be working to lower those costs--which arguably is what we are seeing in the futures markets. Yet if we are seeing that cost suppression vis-a-vis SPR releases, why is the PPI report saying gasoline prices are driving producer prices up?
Those numbers do not add up.