It Depends If You See the Salt Cavern As Half Empty

…or half full.

…”The purpose of the reserve is not for price manipulation,” said a White House spokesman. “The modest fill rate has a negligible impact on prices, and the President believes it is in our national security interest to continue filling it up.”
One oil trader said the president is actually making the right decision, and filling the SPR could even lower prices.
“It acts as a deterrent,” said Phil Flynn, senior market analyst at Alaron Trading in Chicago. “If it was twice the size, we’d be less concerned about disruptions from places like Nigeria or Iran.”


5 Responses to “It Depends If You See the Salt Cavern As Half Empty”

  1. Gunslinger says:

    Two words…

  2. Nobrainer says:

    The “build refineries” thing really isn’t an issue.
    Refining costs are a tiny fraction of gasoline (8%, currently, but sometimes higher during peak seasons), and refining will never be free. At best, more refining capacity will only save 25 cents, on average, a gallon, and probably less than that.

  3. The_Real_JeffS says:

    Nobrainer, building refineries is HALF the issue, the other half being a reliable and flexible source of oil. Supply & demand, y’know.
    Maybe not quite half…..IIRC, there’s a complicated set of laws in this country, driven by the states, which mandates different fuel types. That makes production and distribution more expensive as well.
    The point being, we’ve brought this on ourselves. We can fix it, if we had the will.

  4. Nobrainer says:

    At this point, refining in general is much less than half the issue, much less building refineries. And most people confuse “building refineries” with increasing refining capacity, which are not necessarily the same thing. The former is not being done in the US. The latter is.
    Nonetheless, going back to the start of 2005, 43 cents of every gallon, on average, has gone to refining. We can will all we want, but more refining isn’t going to be able to save us that much per gallon.

  5. The_Real_JeffS says:

    I’m more concerned about supply than price, truth be told. Refining is a genuine bottleneck in the system. Witness the problems in the gasoline supplies post-Katrina.

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