Political Crossfire Forums

[ubikk]

Brooklyn wrote: Quote: Here is a suggestion. We have a strategic oil reserve, what if we organized a strategic fuel reserve for refined products like gasoline, diesel and heating oil?

Aren't our refineries running pretty much at full capacity? How would we ever be able to refine enough to build up a surplus without expanding our capacity to refine more?

I think that's something of a myth. If you follow inventories, they rise and fall all the time. Demand has grown at 2-3% over the last 10 years or so and refineries continued to operate at around 90% during that whole period. In fact, they are still closing refineries, Shell was recently arguing with the State of California about closing a refinery there.

What would happen with a reserve is that you would gradually build up the surpluses off-peak seasons and during periods of rising inventory (current inventory has been rising for a number of weeks now).

[Brooklyn]

Quote: What would happen with a reserve is that you would gradually build up the surpluses off-peak seasons and during periods of rising inventory (current inventory has been rising for a number of weeks now).

Doing this would force prices in the off-peak season to remain as high or almost as high as they are during the peak season because demand would remain somewhat constant here in the states.

[bob.appleyard]

By "peak fuel prices," do you mean temporary price spikes, or what happens to the prices once a resource's extraction peaks?

[ubikk]

bob.appleyard wrote: By "peak fuel prices," do you mean temporary price spikes, or what happens to the prices once a resource's extraction peaks?

I'm trying to deal with the peaks fueled primarily by over-exuberant traders that build a premium into the market price that would not normally be there.

[ubikk]

Brooklyn wrote: Quote: What would happen with a reserve is that you would gradually build up the surpluses off-peak seasons and during periods of rising inventory (current inventory has been rising for a number of weeks now).

Doing this would force prices in the off-peak season to remain as high or almost as high as they are during the peak season because demand would remain somewhat constant here in the states.

Not really. They would be slightly higher, but overall the price would be lower because you're tempering the spikes caused by over-excited speculators. The market price would be more closely tied to the actual supply and demand, minus some of the speculation factor. Plus, if a hurricane shuts stuff down, you've got spare fuel.

[Brooklyn]

Quote: Not really. They would be slightly higher, but overall the price would be lower because you're tempering the spikes caused by over-excited speculators. The market price would be more closely tied to the actual supply and demand, minus some of the speculation factor. Plus, if a hurricane shuts stuff down, you've got spare fuel.

How can you be sure you would end up with lower overall prices? I don't have any data but after thinking about it, it would seem that slightly higher prices year-round with no spikes vs. lower prices year-round with spikes would end up with about the same avg annual price.

I think it would make more sense to try improve the nations mass transit network to the point in which they are efficient enough to be an adequate substitute for driving. The idea of a strategic reserve may make sense, but it isnt a long term solution like improving our transit networks could be.

[bob.appleyard]

ubikk wrote: bob.appleyard wrote: By "peak fuel prices," do you mean temporary price spikes, or what happens to the prices once a resource's extraction peaks?

I'm trying to deal with the peaks fueled primarily by over-exuberant traders that build a premium into the market price that would not normally be there.

So the former then?

OK

While it seems like an alright proposition, would not the accumulation of said reserve drive up the price anyway?

[ubikk]

bob.appleyard wrote: ubikk wrote: bob.appleyard wrote: By "peak fuel prices," do you mean temporary price spikes, or what happens to the prices once a resource's extraction peaks?

I'm trying to deal with the peaks fueled primarily by over-exuberant traders that build a premium into the market price that would not normally be there.

So the former then?

OK

While it seems like an alright proposition, would not the accumulation of said reserve drive up the price anyway?

It would at first, but eventually it should cause the price to more closely reflect reality and not so much speculator perception of reality.

[ubikk]

bob.appleyard wrote: ubikk wrote: bob.appleyard wrote: By "peak fuel prices," do you mean temporary price spikes, or what happens to the prices once a resource's extraction peaks?

I'm trying to deal with the peaks fueled primarily by over-exuberant traders that build a premium into the market price that would not normally be there.

So the former then?

OK

While it seems like an alright proposition, would not the accumulation of said reserve drive up the price anyway?

It would at first, but over time it would ideally let the price more accurately reflect reality and not so much speculator perception of reality.

Anyway, it's just one idea.

[bob.appleyard]

It's OK ubikk, I haven't decided where I stand on it, I'm just asking questions.