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Trump’s SPR: The OPEC Oil Race

Trump’s SPR: The OPEC Oil Race

August 3, 2018 By admin

BY RSH Inc IN RSHinc On 03-08-2018

The Trump Administration announced July 13 th it’s considering of a 30,000,000 barrel release similar to what was done in 2011 during the Arab Spring Sale under President Obama; leading to a oil price drawdown from $100.22/b in early June 2011 to $79/b in September. The Strategic Petroleum Reserve (SPR) is an emergency fuel storage of petroleum maintained underground in Louisiana and Texas by the United States Department of Energy (DOE). It is the largest emergency supply in the world, with the capacity to hold up to 727 million barrels. The United States started the petroleum reserve in 1975 after oil supplies were interrupted during the 1973–1974 oil embargo, to mitigate future supply disruptions- since then it has rarely been tapped or used.
The known drawdowns of it are:
  • 1990–1991: Desert Storm sale – 21 million barrels
  • 1991, 17 million barrels in presidentially ordered drawdown
  • 1996–1997: 28 million barrels in non-emergency sales for deficit reduction
  • 2000: 2.8 million barrels to supply the Northeast Home Heating Oil Reserve
  • 2000, 30 million barrels in response to a concern over low distillate levels in the northeastern

  • U.S.
    • 2005, Hurricane Katrina sale: 11 million barrels – Katrina shut down 95% of crude production and 88% of natural gas output in the Gulf of Mexico. This amounted to a quarter of total U.S. output. About 735 oil and natural gas rigs and platforms had been evacuated due to the hurricane.
    • 2011, Arab Spring sale: 30 million barrels- In non-emergency sale to offset disruptions caused by political upheaval in Libya and elsewhere in the Middle East. The amount was matched by IEA countries, for a total of 60 million barrels released from stockpiles around the world.
    • 2016, DOE announced it would begin the sale of 190 million barrels in January 2017.

      This latest drawdown would be to further push down Oil prices from their current price of $70/b putting increased pressure on OPEC & Russia to resume prior production levels after their recent cut to force raised rates. It can be expected that this drawdown would reduce oil prices similarly to that of the Obama Administration draw, lowering prices over a period of 3-4 months, realistically by about 10-15% bringing current levels between $55-$63/B.

      This plan extends further than consumer price control however as the Trump Administration is planning to leverage this reserve as a tool to demonstrate U.S. Oil independence and emphasize the current administrations no toleration of OPEC/Russia price gauging, something which has historically been a problem in part due to OPEC’s high production costs, and the lifting of prior sanctions against Iran limiting sale.
      About The Author Mr. Ranga Chelva Krishna is the Principle Managing Director of Rising Sun Holdings and UlsterParkRealty. He has an active interest and focus in commodities and economic development and has researched and published multiple articles in regards to economic, commodity, and real estate growth. Administrative Offices New York: 303 Fifth Avenue, Suite 1205, New York, NY 10016 Maryland: 8608 Stevenson Road, Stevenson, MD 21153 India: 395 D.N. Road, Fort, Mumbai 400001 Dubai: PO Box 30451, Dubai, UAE

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