I stumbled upon this article today about how the Senate has voted to halt putting oil into the US Strategic Oil Reserve. One good quote about the reasoning for this was:
"Why on earth should we be putting oil underground at a time of record high prices?" - Sen. Byron Dorgan (D-N.D.)
I can understand that quote if you are also going to do other things like reduce consumption, scale down military operations, etc... But they are not going to do anything else.
On the surface of it, you might think this is a good idea. After all, the basic law of economics (supply and demand) dictates that if demand falls and supply remains constant then the price should go down. But the facts of this case lead me to believe that there will be no significant price drop in gas (what we Americans complain about every day) because:
1. Overall, we Americans consume 21 M barrels of oil a day.
2. We had been putting 70 k barrels into the strategic oil reserve dialy.
3. We currently have 702 M barrels of oil in our reserve.
So we are putting away 0.33 % of what we consume every day. Pretty small I'd say. Also, if our oil supply ran out today, and we kept current levels of consumption, we could last for 33 days. I seem to remember an old adage about how you are supposed to save up 3 months of living expense in case your cash flow ever stops. We are only 1/3 of the way there for our oil.
I think this stoppage by the Senate is short sighted (gotta love election years) and is a mistake for the following reasons:
1. It is not going to make gas prices go down in any measurable way, which is probably the goal.
2. It leaves us with only a month's supply in our strategic oil reserve, and that should really continue to grow since it is highly likely that our supplies will be interrupted as the price of oil gets higher and higher because we will see more and more conflicts around access to oil..
"Why on earth should we be putting oil underground at a time of record high prices?" - Sen. Byron Dorgan (D-N.D.)
I can understand that quote if you are also going to do other things like reduce consumption, scale down military operations, etc... But they are not going to do anything else.
On the surface of it, you might think this is a good idea. After all, the basic law of economics (supply and demand) dictates that if demand falls and supply remains constant then the price should go down. But the facts of this case lead me to believe that there will be no significant price drop in gas (what we Americans complain about every day) because:
1. Overall, we Americans consume 21 M barrels of oil a day.
2. We had been putting 70 k barrels into the strategic oil reserve dialy.
3. We currently have 702 M barrels of oil in our reserve.
So we are putting away 0.33 % of what we consume every day. Pretty small I'd say. Also, if our oil supply ran out today, and we kept current levels of consumption, we could last for 33 days. I seem to remember an old adage about how you are supposed to save up 3 months of living expense in case your cash flow ever stops. We are only 1/3 of the way there for our oil.
I think this stoppage by the Senate is short sighted (gotta love election years) and is a mistake for the following reasons:
1. It is not going to make gas prices go down in any measurable way, which is probably the goal.
2. It leaves us with only a month's supply in our strategic oil reserve, and that should really continue to grow since it is highly likely that our supplies will be interrupted as the price of oil gets higher and higher because we will see more and more conflicts around access to oil..
