Tapping the Strategic Petroleum Reserve

[Sauron]

Someone check my logic here:

1. The Chickenhawk-in-Chief has tapped the SPR as a result of Katrina:
http://money.cnn.com/2005/08/31/news/spr/index.htm

2. The net effect is to loan crude to refineries.

3. But Louisiana's contribution to the national energy supply is the fact that so many refineries are located there. With those refineries out of business for a few months, there will be a bottleneck as refineries have to work overtime.

4. So loaning crude to refineries appears to be nothing more than a feel-good move to affect opinions in the market, which can impact the price of oil by impacting speculation (a large percentage of today's price per barrel is set by speculation);

5. It does nothing to alleviate the bottleneck since crude is not the problem. Instead, the problem is not enough refineries.

Any problems with this idea? Anything I missed?

[Dingfod]

Unless I'm mistaken, the SPR is quite capable of making up for the 1.4 million bpd shut in due to Katrina, it has a maximum withdrawal rate of 4.3 million bpd. However, the refineries that could use it because the Gulf of Mexico production being shut in are also shut in because of Katrina. No, we have a definite refinery bottleneck that negates anything that the SPR could possibly produce. We're screwed, big time. Look for $4 a gallon gasoline in the higher priced areas by this weekend.

[viscousmemories]

Can you try that once more in English, Warren? I get that crude goes to refineries to become gasoline, and that a lot of the refineries are in Louisiana (the news said 42% of the nations refinery capacity is there). What I don't get is whether the refineries in LA are closed because of the disaster or just underperforming, and what benefit having more crude from the SPR provides.

[TomJoe]

Originally Posted by viscousmemories

Can you try that once more in English, Warren? I get that crude goes to refineries to become gasoline, and that a lot of the refineries are in Louisiana (the news said 42% of the nations refinery capacity is there). What I don't get is whether the refineries in LA are closed because of the disaster or just underperforming, and what benefit having more crude from the SPR provides.

From what I gather, most refineries throughout the rest of the country are already working at almost max capacity, so even if we can give them more crude, they're already processing crude into gasoline as fast as they can. Last time I read (which was a day or so ago) about LA, the refineries are all closed until the flooding subsides. Once they can open they'll need crude, but at the moment it's pointless from what I can gather.

But Sauron, even if the move is primarily psychological, if it keeps prices under $4/gallon, it's a good move IMNSHO.

[D. Scarlatti]

Good to know things won't get too distressing for the Lincoln Navigator set.

Thanks Bush.