This is the quality of energy responses we have gotten from Washington for the past 30 years. Bill Daley goes on TV to tell Americans the White House is thinking of doing something to help high gas prices. His answer, tap the strategic petroleum reserve.
I can explain why this is ridiculous to my 4 year old granddaughter. I take a pitcher and put the equivalent of 700,000,000 barrels of oil in the pitcher.( 1 quart per 700 million) Then I take a glass that holds the equivalent of 20,600,000 barrels. That’s our daily crude oil consumption in this country. First, I pour out 1/7 of the pitcher. This represents what experts think will never come back out of the petroleum reserve. These aren’t tanks, they are salt caverns. There is going to shrinkage. Or, pollution if it leaks into the wrong area.
Next I begin pouring from the pitcher into the glass. I put one day’s demand in a bowl. That’s 3.4% of the pitcher. Or, one ounce. Then I take shot glasses from the bowl. I put a few eyedrops in each shot glass. I begin moving the shot glasses to 20 spots representing refineries around the US. It takes zero days to get to the refineries immediately around the bowl. Moving to other spots may take up to a week. This represents one day’s demand in the bowl. Remember, if I pump the petroleum reserve dry it will supply a grand total of 30 days US supply.
But, now that I’m Obama, how do I price the oil from the reserve? It’s a duke’s mixture of imports over 30 years. That’s how long it’s taken to store 30 days supply for emergency needs. We have put a day a year in over the past 30years. Just as Obama plans to destroy the future for my kids and grand kids, he plans to make sure he destroys a thirty year effort to create emergency oil for the same reason. His political future.
So, let’s assume they only release a small amount of the reserve. Let’s say 200,000 barrels. Does he price the 200,000 barrels at the WTI crude price or some amount below that to put downward pressure on the imported oil price? Let’s say $80 a barrel. If the average cost per barrel of the 20,600,000 barrels refined that day is $100, it now becomes 20,400,000 barrels at $100 and 200,000 barrels at $80. It lowers the average cost to $92.90 a barrel.
But, a refinery doesn’t produce a barrel of gasoline for a barrel of crude. Let’s say the refineries work the hardware as hard as they can and they get 60% gasoline from every barrel of crude. So, 60% of that $7.10 savings on crude goes to gasoline. That’s $4.26 a barrel of gasoline. Wait, a barrel is 42 gallons. So, it comes to 10 cents a gallon if 200,000 barrels are released and sold into the supply system at $80 a barrel.
Let me be the first to tell you Obama’s plan is a farce. A political ploy to make it look like he’s doing something. Daley says our allies want us to do this. Sure, let’s drain our emergency supply we might need if war would break out and we would be cut off from even greater amounts of supply.
The Obama platform from day one has been to drive up gasoline prices to make expensive green energy more competitive and cut gasoline demand. He got what he wanted. The Republicans can hammer him on this day in and day out. They need to hammer him on his strategic reserve idea as well.
My grand daughter doesn’t want to use up the whole pitcher of Kool Aid if she can’t have any more for 10 years. She’s much smarter than Obama.
