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The Case against the Strategic Petroleum Reserve
Cato Institute ^ | November 21, 2005 | Jerry Taylor and Peter Van Doren

Posted on 04/26/2006 7:26:11 AM PDT by Tolerance Sucks Rocks

Executive Summary

The Strategic Petroleum Reserve has been almost uniformly embraced by politicians and energy economists as one of the best means to protect the nation against oil supply shocks. This study finds little evidence for the proposition that government inventories are necessary to protect the country against supply disruptions. Absent concrete market failures, government intervention in oil markets is unlikely to enhance economic welfare.

A conservative estimate finds that the SPR has cost taxpayers at least $41.2–$50.8 billion (in 2004 dollars), or $64.64–$79.58 per barrel of oil deposited therein. Accordingly, the "premium" associated with the insurance provided by the SPR is quite high relative to market prices for oil, even during 2005.

The SPR has been tapped only three times, and in each of those instances, the releases were too modest and, with the exception of the 2005 release related to Hurricane Katrina, too late to produce significant benefits. Accordingly, the costs associated with the SPR have been larger than the benefits thus far.

The SPR insurance policy is unlikely to pay off in the future either. First, major oil supply shocks are much rarer than many observers believe. Second, the executive branch has been unwilling to use the reserve as quickly and robustly as economists recommend. Third, the benefits from a release are almost certainly overstated.

Policymakers should resist calls to increase the size of the reserve and instead sell the oil within the SPR and terminate the program.

Full Text


TOPICS: Business/Economy; Constitution/Conservatism; Editorial; Government; News/Current Events; Philosophy; Politics/Elections
KEYWORDS: embargo; energy; energypolicy; oil; pricespikes; privatereserves; spr

1 posted on 04/26/2006 7:26:14 AM PDT by Tolerance Sucks Rocks
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To: Tolerance Sucks Rocks
While awaiting the PDF download, I must ask if these "experts" Jerry Taylor and Peter Van Doren, have considered the military necessity for strategic oil reserves?




2 posted on 04/26/2006 7:38:11 AM PDT by G.Mason ("I don't know the key to success, but the key to failure is to try to please everyone" -- Bill Cosby)
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To: Tolerance Sucks Rocks

And here I thought the The Strategic Petroleum Reserve was for STRATEGIC purposes, ie. military or national defense, not for some weenies complaining about the price of a gallon of gas.


3 posted on 04/26/2006 7:40:11 AM PDT by CPOSharky (Go home and fix your own country before you complain about ours.)
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To: Tolerance Sucks Rocks

I never thought that the Strategic Petroleum Reserve was created as an economic tool, but rather a reserve for a time of war. In a major world-war type conflict, where no oil could get here from the oil-rich middle east, it would be a good thing to have a supply of oil to fuel our tanks and armored personnel carriers. I think it was Clinton who first used the Strategic Petroleum Reserve as an economic tool, in much the same way as he drew down our military and spent the "peace dividend" on stupid social programs. So a libertarian arguing against it can do so on economic grounds and find no objections here, but let's not just get rid of it as if it were a cave full of USDA cheese.


4 posted on 04/26/2006 7:42:42 AM PDT by webheart
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To: CPOSharky
"And here I thought the The Strategic Petroleum Reserve was for STRATEGIC purposes, ie. military or national defense, not for some weenies complaining about the price of a gallon of gas." Once upon a time it was the Naval Strategic Petroleum Reserve and its purpose was to ensure that Naval vessels had access to fuel should offshore sorces be cut off. Then of course, the politicians got ahold of it...
5 posted on 04/26/2006 7:43:06 AM PDT by Paine in the Neck
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To: G.Mason

It's Cato. They'd be happy if the SPR were eliminated, thus hindering our ability to handle ourselves militarily. One of their policy goals is peace abroad, seemingly at any cost, because it's better for market forces.


6 posted on 04/26/2006 7:44:11 AM PDT by Cyclopean Squid (History is a work in progress)
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To: G.Mason
I must ask if these "experts" Jerry Taylor and Peter Van Doren, have considered the military necessity for strategic oil reserves?

Probably not. Coming from Cato, these guys take a strong libertarian view on such things, and thus has a prediliction against ideas that are not driven by strictly free-market considerations. Given the typical big-L Libertarian idiocy on all matters military, I wouldn't trust these guys to give it an honest assessment even if they did attempt to cover it.

7 posted on 04/26/2006 7:46:00 AM PDT by r9etb
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To: G.Mason
"While awaiting the PDF download, I must ask if these "experts" Jerry Taylor and Peter Van Doren, have considered the military necessity for strategic oil reserves?"

The very first thought that popped into my head. Hence the term "strategic".

8 posted on 04/26/2006 7:50:20 AM PDT by Desron13 (If you constantly vote between the lesser of two evils then evil is your ultimate destination.)
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To: Cyclopean Squid
"It's Cato. They'd be happy if the SPR were eliminated, thus hindering our ability to handle ourselves militarily. One of their policy goals is peace abroad, seemingly at any cost, because it's better for market forces."

They most certainly would.

I am in awe of their logic in the following quote ...

"Absent a naval blockade shutting down U.S. ports, the near disappearance of maritime oil transport, or a complete international boycott of oil sales to the United States, foreign oil will always be available to U.S. consumers."

BTW ... After a skim read of this "report" I found nothing concerning militarily usage.

9 posted on 04/26/2006 7:59:26 AM PDT by G.Mason ("I don't know the key to success, but the key to failure is to try to please everyone" -- Bill Cosby)
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To: Desron13
I think we all jumped on that one. All but the authors.

But then to be on the left indicates a an abnormal desire to be a sacrificial lamb for the lion. ;)




10 posted on 04/26/2006 8:05:19 AM PDT by G.Mason ("I don't know the key to success, but the key to failure is to try to please everyone" -- Bill Cosby)
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To: r9etb
" ... I wouldn't trust these guys to give it an honest assessment even if they did attempt to cover it."


I suspect you to be correct.




11 posted on 04/26/2006 8:09:20 AM PDT by G.Mason ("I don't know the key to success, but the key to failure is to try to please everyone" -- Bill Cosby)
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To: G.Mason
There remains something of our Naval Petroleum Reserves CLICK THIS but not all that much. Mostly the reserves have been sold and leased off.

If the Navy thinks it makes more sense to rely on domestic production, Canada and Mexico then to have their own reserves, Cato may have a point. Pumping oil out of the former Naval oil reserves while at the same time pumping oil into the SPR -- why couldn't they just leave the Naval reserves alone and eliminate the middle man???

(1998 -- sounds like another part of the "Clinton legacy" -- but the selloff certainly DOES post-date the SPR.)

12 posted on 04/26/2006 8:18:28 AM PDT by Sooth2222
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To: G.Mason

Cato doesn't deserve complete excoriation they do not hide who they are and when they write they offer the sources for those facts. We don't always have to agree with their conclusions.

The SPR is a good thing.

Iran wants a fight?
Crush them,
Salt their land
Take their oil.


W


13 posted on 04/26/2006 8:26:24 AM PDT by WLR ("fugit impius nemine persequente iustus autem quasi leo confidens absque terrore erit")
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To: G.Mason

Exactly. The Reserve is for Military use.


14 posted on 04/26/2006 8:31:05 AM PDT by expatpat
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To: Sooth2222
Thanks for the link.




15 posted on 04/26/2006 8:32:14 AM PDT by G.Mason ("I don't know the key to success, but the key to failure is to try to please everyone" -- Bill Cosby)
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To: WLR
"Cato doesn't deserve complete excoriation they do not hide who they are and when they write they offer the sources for those facts. We don't always have to agree with their conclusions."


Ah ... yes

Like the Brookings Institute, or the Ford Foundation, or ... ;)




16 posted on 04/26/2006 8:39:16 AM PDT by G.Mason ("I don't know the key to success, but the key to failure is to try to please everyone" -- Bill Cosby)
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To: CPOSharky

I thought the The Strategic Petroleum Reserve was for STRATEGIC purposes, ie. military or national defense..

---

Correct. It was never intended to serve as backdoor escape mechanism for weinies (elected officials) owned by the envirowacko movement who have only sought to block development of reserves of natural resources already existent here in the "Homeland".


17 posted on 04/26/2006 9:29:39 AM PDT by NormsRevenge (Semper Fi)
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To: r9etb

It's a shame that the big-L Catos are SO close, yet SO far.


18 posted on 04/26/2006 5:42:45 PM PDT by Gondring (I'll give up my right to die when hell freezes over my dead body!)
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