Yup, the U.S. is going to give the slightly controversial Blanche DuBois* oil policy a whirl.
From Bloomberg via Yahoo Finance, July 17:
Massive US Oil Caverns Sit Empty and Will Take Years to Refill
Stroll through the West Hackberry oil facility on the US Gulf Coast and there’s not much to see: some pipelines and other industrial equipment. But buried deep beneath the surface are storage caverns so massive they’re tall enough to house the Empire State Building with plenty of room to spare.
These reserve sites are supposed to hold enough backup supply to ensure the US never runs short of oil. Right now, they’re sitting half empty.
It only took about six months for the Biden administration to sell off 180 million barrels from the federal stash in the fastest withdrawal on record. But refilling it to capacity will likely take decades, if it happens at all. Experts say that a lack of funding and aging infrastructure will plague the process, even as the Energy Department has pledged to keep buying.
In the meantime, with the reserve at its lowest level in 40 years, the US could be vulnerable to oil price shocks. It also means that during domestic supply crunches, the nation will be left to the mercy of global exporters like Saudi Arabia, Russia and the rest of the OPEC+ cartel. The issue has also created yet another political firestorm, as Republicans have blasted the Biden Administration for its record drawdown.
Mandated yearly sales starting in 2017 meant that the reserves had already been seeing small, but steady, declines. Then came Russia’s invasion of Ukraine in early 2022, and with it, a surge in global oil prices that fed through into fuel inflation. To combat the spike, President Joe Biden undertook an unprecedented selling campaign — ordering 180 million barrels out of the Strategic Petroleum Reserve, nearly five times bigger than any previous sale. Gasoline prices soon began to peak, and are down more than 20% in the past year.
The Strategic Petroleum Reserve, known as the SPR, currently stands at 346.8 million barrels, the lowest level since 1983 and equal to about about 18 days worth of supplies. The total authorized storage capacity is 714 million.....
In the final scene of the play A
Streetcar Named Desire the character Blanche DuBois says to the
psychiatric hospital doctor who has come to take her to the mental
institution:
"Whoever you are—I have always depended on the kindness of strangers."
Among the cognoscenti this last line has two meanings: 1) the sadness of the fact she has actually received no kindnesses, only trades for sex and 2) a signal that she has completely broken with reality.
ThoughtCo has a good overview of the received wisdom.
Look, I get it. There are real advantages in trading a depreciating currency for other people's stuff while keeping your own stuff in the ground.
And you don't have to deal with protesters from your own party at the mine sites.
It's just that, as we've seen over the last year, supply lines are fragile, a weak spot even without unfriendlies doing an interdiction.
Should someone actively attempt to halt transportation it would make the Ever Given snafu look like child's play. As just one example, China has been very active in extending their belt and road initiative in Panama, including a $1.4 billion bridge over the canal and rail and other infrastructure.
And that's just one potential flashpoint. The Chinese influence in Brazil, hitherto based on VALE and iron ore could potentially go exponential as Brazil expands/modernizes its shipping and rail infrastructure. And then there's Australia...and...
Tune in next week as we use Anna Karenina to explain the administration's American Families Plan:“All happy families are alike; each unhappy family is unhappy in its own way.”
