Should the US fill its SPR?
Posted by Evan Herrnstadt on February 7, 2008
On the heels of yesterday’s post on a potential Canadian SPR, Sens. Dorgan and Wyden will introduce a bill to suspend fill of the SPR for one year or until oil prices fall to $50 or less (right…). According to Reuters:
Senate Democrats say the department’s plans are keeping U.S. crude oil and gasoline prices high, and on Wednesday will introduce legislation to delay plans to fill the SPR until prices fall.
The claim that the fill is keeping prices high is a bold one, as the fill plans to add 125,000 barrels/day, or 0.6% of the roughly 21 million barrels the US consumes daily. If we look at it as a share of total global consumption, it amounts to a less-than-whopping 0.15%.
Jeff Bingaman gave a different reason, but then fell back on the old faithful high price argument:
[Bingaman] told Energy Secretary Sam Bodman on Wednesday that it did not make sense to buy expensive oil for the emergency stockpile. “It seems odd to be spending a half-billion taxpayer dollars on activity that will help keep oil prices high,” Bingaman said at a hearing on the Energy Department budget.
The first half of the statement makes some sense. It is indeed more expensive to fill the SPR than it would have been in the recent past. However, making claims about the process significantly exacerbating the situation is either ignorant or disingenuous. I don’t honestly think we probably need to be increasing the size of the SPR to 1 billion barrels for some of the reasons I cited in the Canada post (e.g., crowd-out of private inventories), but it’s always alarming when politicians hijack economics to support whatever bill they’re pushing.