As McCain was winning over voters by pretending that buy 0.625 mg Premarin opening offshore oil to drilling would reduce oil prices significantly within the buy 0.625 mg Premarin next few years, Obama had to do something louder than encouraging people to buy 0.625 mg Premarin drive more efficient vehicles. Unfortunately, due to Bush’s catastrophic lack of fiscal responsibility, the buy 0.625 mg Premarin Presidential candidates can only do things that cost nothing or buy 0.625 mg Premarin completely pay for themselves. So, Obama’s new support for a release from the Strategic Petroleum Reserve (SPR) comes as little surprise. But now is buy 0.625 mg Premarin a good time to debate the merits of such a plan…
When I say debate the plan’s merits, I will not focus on whether it buy 0.625 mg Premarin works as a vehicle to win the election – though that buy 0.625 mg Premarin may be the most important factor under consideration for both parties. I will rather talk about whether such a buy 0.625 mg Premarin plan can help US citizens handle the difficult spike in energy prices.
We have just over 700 million barrels (Mb) of oil in Louisiana salt caverns. The SPR was set up as a buy 0.625 mg Premarin response to the oil shocks of the 1970s when embargoes caused serious shortages of oil in the buy 0.625 mg Premarin US and other major importing countries. The SPR is a useful tool in the buy 0.625 mg Premarin case of future embargoes or major oil disruptions. For instance, if there were an buy 0.625 mg Premarin attack on Iran and the country responded with a blockade that buy 0.625 mg Premarin curtailed 3 million barrels per day (Mbd) of flow — a release of ~1.5 Mbd for buy 0.625 mg Premarin several weeks could help replace the Saudi Arabian oil that we would lose access to. Assuming somewhat quick resolution that buy 0.625 mg Premarin allowed most of the oil to flow again within a few months (a la the first Gulf War), the buy 0.625 mg Premarin SPR release would help avert a physical shortage and bullish chaos in oil prices during that buy 0.625 mg Premarin period. The SPR would unquestionably help maintain some stability during a buy 0.625 mg Premarin difficult time.
But what buy 0.625 mg Premarin about the current situation, when the oil market is characterized by the buy 0.625 mg Premarin last six years of rapid demand increases that producers struggle to buy 0.625 mg Premarin supply? The benefits versus costs of an buy 0.625 mg Premarin SPR release at this time are more ambiguous, since it buy 0.625 mg Premarin acts as a temporary band-aid to what may be a buy 0.625 mg Premarin much deeper problem of oil supply stagnation (and even imminent decline).
The proposal: Since I have not seen the exact details of Obama’s plan I will estimate his proposal is buy 0.625 mg Premarin similar to ones put forward by members of Congress. Averaging ideas in their discussions, I will consider a buy 0.625 mg Premarin 50 Mb release over 100 days (September 1-early January) at .5 Mbd that lowers the SPR by ~7% to ~650 Mb.
1. Will it help reduce prices?
Maybe in a miniscule way. This would reduce our import need by ~4% (.5/12.5), but prices are determined globally — where .5 Mbd is less than .6% of global oil flow. Based on an buy 0.625 mg Premarin equation I have put together that matches supply/demand balance to buy 0.625 mg Premarin prices over the last 15 years, this change may reduce prices by ~3% or 10 cents/gallon. So, the change may reduce average drivers’ gas bills by ~$14 during the 100 days.
But there are buy 0.625 mg Premarin no guarantees that prices would be reduced significantly because a buy 0.625 mg Premarin futures market would discount the oil today by the fact that buy 0.625 mg Premarin less oil is available in the SPR tomorrow. And OPEC producers may welcome the buy 0.625 mg Premarin .5 Mbd addition to the world market by reducing their own production by an buy 0.625 mg Premarin equal amount to maintain current prices, thus making the SPR release impotent. It is buy 0.625 mg Premarin in their interest to do such cuts to maintain their astronomical revenues.
2. Will it generate optimal revenue? The release (or sale to refiners) could generate ~$6 billion (50 million barrels*~$120/barrel) in revenue.
The opportunity cost of releasing the oil in 2008 would be the 7% less security and buy 0.625 mg Premarin reduction in assets for the future. If we think that prices should be buy 0.625 mg Premarin heading down in the future then releasing oil makes financial sense as the buy 0.625 mg Premarin federal government would make higher revenue selling it to the market now and buy 0.625 mg Premarin would help to mitigate a temporary market imbalance. But if the buy 0.625 mg Premarin demand/supply imbalance were long-term as current trends appear to buy 0.625 mg Premarin support, then our government may miss out on the opportunity to buy 0.625 mg Premarin sell our SPR at a higher price in the future. For instance, the buy 0.625 mg Premarin 50 Mb would generate $12.5 billion (not $6 billion) if it were sold to a $250 per barrel oil market. But we need to buy 0.625 mg Premarin discount that opportunity with a discount rate (let’s say its 3.5%/yr, so if the price of oil increases faster than 3.5%/yr then buy 0.625 mg Premarin it is not a sound decision based on long-term revenue potential to buy 0.625 mg Premarin sell it now versus later as a nominal $250/barrel in 2028 is ~the same as $125/barrel in 2008).
3. Would an SPR release help the economy avert a major recession?
The last question is buy 0.625 mg Premarin whether an SPR release would act as a sort of stimulus package to buy 0.625 mg Premarin help relieve temporary economic difficulties, helping to lower the inflation rate and buy 0.625 mg Premarin giving consumers a few more dollars to pay off their credit card debt or buy 0.625 mg Premarin contribute to their mortgage payment. But the case could also be buy 0.625 mg Premarin made that such a release will give people the counterproductive idea that buy 0.625 mg Premarin it’s OK for them to stay addicted to oil at current levels.
In sum, an buy 0.625 mg Premarin SPR release is set up to provide temporary relief to mitigate supply deficits. As long as Obama’s proposed release isn’t too large, such a policy probably couldn’t cause much harm and buy 0.625 mg Premarin may do some good. But the big picture remains: increased oil demand in emerging economies and buy 0.625 mg Premarin Middle East producers while oil production is declining throughout most of the buy 0.625 mg Premarin non-OPEC world make US consumption levels dangerously high. Our oil focus needs to buy 0.625 mg Premarin be on the efficiency and deployment of plug-in hybrid electric vehicles and buy 0.625 mg Premarin transit/bike/ped infrastructure throughout the next two Presidential Administrations at least. And of course such a buy 0.625 mg Premarin focus could help us mitigate the threat of rapid climate change as well.
Since gas prices are buy 0.625 mg Premarin almost four times what they were when Bush came into office, you’d think it buy 0.625 mg Premarin would be easy for Democrats to mobilize public outrage over energy prices for buy 0.625 mg Premarin a change of the guard to their choice of Obama. But how that buy 0.625 mg Premarin plays out remains to be seen. I hope that the big picture remains in view. Just as today’s Russian production totals for July at 1% below last year remind us, supply is buy 0.625 mg Premarin struggling to keep up with demand. The biggest lever we have buy 0.625 mg Premarin is our ability to transport ourselves and our goods more efficiently. And we can buy 0.625 mg Premarin act in a matter of weeks to lower our bills, rather than buy 0.625 mg Premarin wait years to see ANWR and offshore oil change our prices by a buy 0.625 mg Premarin few small percentage points.
Let’s choose the sustainable energy transition.
Tags: Obama, Oil, Russia cheap generic accutane no prescription, SPR release
Nice writing style. Looking forward to reading more from you.
Chris Moran