Political Crossfire Forums

ubikk · Joined: 27 Jul 2006 Posts: 2115

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? This would prevent seasonal swings and temper the huge peaks due to world news events, bad weather and most important: rampant speculation.

We'd probably need only a few months reserve. Fuel in proper storage lasts for years, as long as it is not exposed to air it lasts almost indefinitely. You organize it on a First-in, First-out basis. When prices spike due to rebels in Nigeria or a Hurricane in the Gulf, they would sell product from the reserve and mitigate the spike.

For example, right now we have about 200 million barrels on hand:

http://tonto.eia.doe.gov/oog/info/twip/twip.asp

By increasing minimum storage requirements, we push that up to say, 400 million bbls. We can either use regulation to make industry store more of their own product, or the government could form something similar port authorities with public storage terminals where the gas flows through the reserve system like a big bulge in the lines.

Thoughts?

Iriemon · Joined: 18 Apr 2006 Posts: 621 Location: Miami

ubikk wrote: 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? This would prevent seasonal swings and temper the huge peaks due to world news events, bad weather and most important: rampant speculation.

We'd probably need only a few months reserve. Fuel in proper storage lasts for years, as long as it is not exposed to air it lasts almost indefinitely. You organize it on a First-in, First-out basis. When prices spike due to rebels in Nigeria or a Hurricane in the Gulf, they would sell product from the reserve and mitigate the spike.

Thoughts?

Sounds difficult to administer and probably ineffective in practice.

How do you distribute the strategically stored fuel? Who gets it? At what price? If price is market price it doesn't help the price spike. If it is below market price, everyone wants it. Who get it? What guarantee is there that the person who gets the strategic oil sells it at a lower price instead of just making an extra profit at the taxpayer's expense (not that that is not anything new or unique). Regardless of the amount of the reserves, it is not going to put a dent in global oil availability or affect global crude prices.

I think a better idea is a gas tax, slowly ramped up over time to a couple bucks a gal. That would encourage efficiency, conservation, alternative energy, exploration, and reduce our addiction to the ME oil tit. Should have done it 15 years ago when Clinton suggested it, when oil was relatively cheap.

With a tax on gas, it is easy and effective to temporarily lower the tax to adjust for the price spike, and in that way price changes can be smoothed out over time.

LostSoul3412 · Joined: 11 Feb 2005 Posts: 8162

No, because the only way humanity will change their habits is through natural force. In the issue of energy, that natural force will be the compete use of every single oil resource on the planet; therefore leaving us with no choice but to develop alternative energies.

Something that the market can take care of on its own.

Iriemon · Joined: 18 Apr 2006 Posts: 621 Location: Miami

LostSoul3412 wrote: No, because the only way humanity will change their habits is through natural force. In the issue of energy, that natural force will be the compete use of every single oil resource on the planet; therefore leaving us with no choice but to develop alternative energies.

Something that the market can take care of on its own.

I'd put it: Something the market *will* take care of on its own, however harshly and destructively it does it.

"The market" is efficient and ultimately effective, but does not always provide the best way to address every situation, particularly where it is subject to manipulation by nations that don't count among our strongest allies.

LostSoul3412 · Joined: 11 Feb 2005 Posts: 8162

Iriemon wrote: I'd put it: Something the market *will* take care of on its own, however harshly and destructively it does it.

You say that like it's a problem.

Iriemon wrote: "The market" is efficient and ultimately effective, but does not always provide the best way to address every situation, particularly where it is subject to manipulation by nations that don't count among our strongest allies.

Another reason to end economic diplomacy and institutionalize free trade.

ubikk · Joined: 27 Jul 2006 Posts: 2115

LostSoul3412 wrote:
Something that the market can take care of on its own.

The market is still taking care of it, you are just mitigating the extreme spikes caused by speculation. When there's some kind of emergency that would normally cause the price to spike you immediately sell a bunch of fuel from the reserve. Over time when the price drops, you gradually buy it back. By eliminating spikes, the overall area under the price curve will probably be lower because you've tempered the speculation effect on rising prices. Prices will only rise when there is a genuine shortage, not just a psychological one.

This would make it easier for businesses, schools and local governments to plan expenses, for example.

ubikk · Joined: 27 Jul 2006 Posts: 2115

Iriemon wrote:
Sounds difficult to administer and probably ineffective in practice.

Why would it be difficult and/or ineffective? It's just storage capacity.

perdidochas · Joined: 06 Mar 2006 Posts: 15424 Location: Florida

ubikk wrote: 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? This would prevent seasonal swings and temper the huge peaks due to world news events, bad weather and most important: rampant speculation.

We'd probably need only a few months reserve. Fuel in proper storage lasts for years, as long as it is not exposed to air it lasts almost indefinitely. You organize it on a First-in, First-out basis. When prices spike due to rebels in Nigeria or a Hurricane in the Gulf, they would sell product from the reserve and mitigate the spike.

Thoughts?

Gasoline has a limited shelf life. Try running a lawn mower on the gas that has been in it's tank all winter......

I think we need to diversify our refinery capacity geographically first.

ubikk · Joined: 27 Jul 2006 Posts: 2115

perdidochas wrote:

Gasoline has a limited shelf life. Try running a lawn mower on the gas that has been in it's tank all winter......

The gas in the lawnmower is exposed to air and condensation. It will last years in proper storage. Take the gas out, and fill an airtight bottle to the top with gas and cap it. It will be fine next Spring.

Besides, like i said, the system it's predicated overall increase in storage capacity with first-in, first-out use. I'm not talking about putting it in a hole in the ground. Just increases in widely distributed storage of a few months.'

For example, right now we have about 200 million barrels on hand:

http://tonto.eia.doe.gov/oog/info/twip/twip.asp

By increasing minimum storage requirements, we push that up to say, 400 million bbls. We can either use regulation to make industry store more of their own product, or the government could form something similar port authorities with public storage terminals where the gas flows through the reserve system like a big bulge in the lines.

Iriemon · Joined: 18 Apr 2006 Posts: 621 Location: Miami

Quote: [quote="LostSoul3412"] Iriemon wrote: I'd put it: Something the market *will* take care of on its own, however harshly and destructively it does it.

You say that like it's a problem.

It is a problem. The unregulated market 1) makes our country more dependent upon ME nations for the supply of a critical resource, which even now is driving our foreign policy; 2) it makes our economy vulnerable to shocks of rapid price changes, which are more harmful that gradual increases.

Quote: Iriemon wrote: "The market" is efficient and ultimately effective, but does not always provide the best way to address every situation, particularly where it is subject to manipulation by nations that don't count among our strongest allies.

Another reason to end economic diplomacy and institutionalize free trade.

Because it is good to be utter dependent upon ME oil nations?

Iriemon · Joined: 18 Apr 2006 Posts: 621 Location: Miami

ubikk wrote: Iriemon wrote:
Sounds difficult to administer and probably ineffective in practice.

Why would it be difficult and/or ineffective? It's just storage capacity.

Please address the questions I asked.

ubikk · Joined: 27 Jul 2006 Posts: 2115

Iriemon wrote: ubikk wrote: Iriemon wrote:
Sounds difficult to administer and probably ineffective in practice.

Why would it be difficult and/or ineffective? It's just storage capacity.

Please address the questions I asked.

I have been trying to do that.

The answers is there are multiple ways to do it. One is simply by increasing minimum storage requirements accross the board that can be waived in emergencies like hurricanes or lowered during peak driving seasosn. Another is by creating public storage terminals that the fuel flows through, these terminals are kept fiiled to a certain level, except in the event of an emergency, where the fuel is made available on the market.

I'm all for the tax if it's applied properly, but poltically it's a hard sell and a campaign breaker. I'm just offering a suggestion in the short-term to help stabilize the markets. The long-term trend for fuel prices is up, regardless, if we don't do something about demand.

LostSoul3412 · Joined: 11 Feb 2005 Posts: 8162

Iriemon wrote: It is a problem. The unregulated market 1) makes our country more dependent upon ME nations for the supply of a critical resource, which even now is driving our foreign policy; 2) it makes our economy vulnerable to shocks of rapid price changes, which are more harmful that gradual increases.

Again, I fail to see how this is a problem. As far as economic dependency, the government shouldn't even be a part of the economy. The private sector would compensate for both of the "problems" you presented, because it wouldn't have any other option.

Also, more harmful to whom? The government? Get the government out of the economy. The company? Tough, they're selling resources they can't control. The consumer? Tough, you want a car, you're paying for it.

Iriemon wrote: Because it is good to be utter dependent upon ME oil nations?

We're not dependent on the nations, we're dependent on the resources. Don't like it? Don't use it.

Iriemon · Joined: 18 Apr 2006 Posts: 621 Location: Miami

ubikk wrote: Iriemon wrote: ubikk wrote: Iriemon wrote:
Sounds difficult to administer and probably ineffective in practice.

Why would it be difficult and/or ineffective? It's just storage capacity.

Please address the questions I asked.

I have been trying to do that.

The answers is there are multiple ways to do it. One is simply by increasing minimum storage requirements accross the board that can be waived in emergencies like hurricanes or lowered during peak driving seasosn. Another is by creating public storage terminals that the fuel flows through, these terminals are kept fiiled to a certain level, except in the event of an emergency, where the fuel is made available on the market.

"How do you distribute the strategically stored fuel? Who gets it? At what price? If price is market price it doesn't help the price spike. If it is below market price, everyone wants it. Who get it? What guarantee is there that the person who gets the strategic oil sells it at a lower price instead of just making an extra profit at the taxpayer's expense (not that that is not anything new or unique). Regardless of the amount of the reserves, it is not going to put a dent in global oil availability or affect global crude prices."

Quote: I'm all for the tax if it's applied properly, but poltically it's a hard sell and a campaign breaker. I'm just offering a suggestion in the short-term to help stabilize the markets. The long-term trend for fuel prices is up, regardless, if we don't do something about demand

I agree that political issues are problematic.

Iriemon · Joined: 18 Apr 2006 Posts: 621 Location: Miami

LostSoul3412 wrote: Iriemon wrote: It is a problem. The unregulated market 1) makes our country more dependent upon ME nations for the supply of a critical resource, which even now is driving our foreign policy; 2) it makes our economy vulnerable to shocks of rapid price changes, which are more harmful that gradual increases.

Again, I fail to see how this is a problem. As far as economic dependency, the government shouldn't even be a part of the economy. The private sector would compensate for both of the "problems" you presented, because it wouldn't have any other option.

Also, more harmful to whom? The government? Get the government out of the economy. The company? Tough, they're selling resources they can't control. The consumer? Tough, you want a car, you're paying for it.

Iriemon wrote: Because it is good to be utter dependent upon ME oil nations?

We're not dependent on the nations, we're dependent on the resources. Don't like it? Don't use it.

It's the "tough" part that is tough, as you point out. People can react to slow change effectively. On the other hand, if price go up 500% in a year, it's pretty hard to unload that 12 mpg SUV you bought when gas was a $1 a gallon.

Sure, the market can effects this change, I agree. Wreaking havoc and throwing the economy into a rescession at the same time. Most would agree that if there is a way to avoid that, it would be better.

LostSoul3412 · Joined: 11 Feb 2005 Posts: 8162

Iriemon wrote: It's the "tough" part that is tough, as you point out. People can react to slow change effectively. On the other hand, if price go up 500% in a year, it's pretty hard to unload that 12 mpg SUV you bought when gas was a $1 a gallon.

Yeah, s*cks for you. Good thing I don't drive an SUV.

Iriemon wrote: Sure, the market can effects this change, I agree. Wreaking havoc and throwing the economy into a rescession at the same time. Most would agree that if there is a way to avoid that, it would be better.

Oh, I would agree, but government shouldn't be the one facilitating that change. Also, what do you think is going to happen when the government is the only one with oil, and companies are willing to buy it at the price of $1,000 a barrel? The government's going to sell. The oil reserves are merely a tool of the government to take money from the private sector. The only way we're going to become less dependent on oil is to completely use up every single drop of it; therefore forcing us to adopt new energy sources.

ubikk · Joined: 27 Jul 2006 Posts: 2115

Iriemon wrote:
"How do you distribute the strategically stored fuel?

The same way we do now. Through the pipelines that connect the refiners and the distribution terminals. You just add to existing storage.

Quote: Who gets it?

Whoever wants to buy it. You just sell the options for it on the market

Quote: At what price?

At the market price

Quote: If price is market price it doesn't help the price spike.

Yes it does, because at the same time you speculators are panicking over some rhetoric in Iran, you've just increased supply which will balance the spike. When you sell futures/options prices decline. When you buy the prices go up.

Quote: If it is below market price, everyone wants it.

It sells at the market price

Quote: Who get it?

whoever wants to buy it

Quote: What guarantee is there that the person who gets the strategic oil sells it at a lower price instead of just making an extra profit at the taxpayer's expense (not that that is not anything new or unique).

It's all the same market.

Quote: Regardless of the amount of the reserves, it is not going to put a dent in global oil availability or affect global crude prices."

That's not the purpose of the reserve. The purpose is to temper the speculator effect on price spikes and to prepare for emergencies like hurricanes.

Iriemon · Joined: 18 Apr 2006 Posts: 621 Location: Miami

Quote: [quote="LostSoul3412"] Iriemon wrote: It's the "tough" part that is tough, as you point out. People can react to slow change effectively. On the other hand, if price go up 500% in a year, it's pretty hard to unload that 12 mpg SUV you bought when gas was a $1 a gallon.

Yeah, s*cks for you. Good thing I don't drive an SUV.

Me neither. Why would you presume I did?

Quote: Iriemon wrote: Sure, the market can effects this change, I agree. Wreaking havoc and throwing the economy into a rescession at the same time. Most would agree that if there is a way to avoid that, it would be better.

Oh, I would agree, but government shouldn't be the one facilitating that change. Also, what do you think is going to happen when the government is the only one with oil, and companies are willing to buy it at the price of $1,000 a barrel? The government's going to sell. The oil reserves are merely a tool of the government to take money from the private sector. The only way we're going to become less dependent on oil is to completely use up every single drop of it; therefore forcing us to adopt new energy sources.

I also think that using stockpiled fuel to try to offset oil price shocks is not a good solution. There are much more effective ways to regulate a market that trying to supplement the supply of goods.

Iriemon · Joined: 18 Apr 2006 Posts: 621 Location: Miami

ubikk wrote: Iriemon wrote:
"How do you distribute the strategically stored fuel?

The same way we do now. Through the pipelines that connect the refiners and the distribution terminals. You just add to existing storage.

Quote: Who gets it?

Whoever wants to buy it. You just sell the options for it on the market

Quote: At what price?

At the market price

Quote: If price is market price it doesn't help the price spike.

Yes it does, because at the same time you speculators are panicking over some rhetoric in Iran, you've just increased supply which will balance the spike. When you sell futures/options prices decline. When you buy the prices go up.

Quote: If it is below market price, everyone wants it.

It sells at the market price

Quote: Who get it?

whoever wants to buy it

Quote: What guarantee is there that the person who gets the strategic oil sells it at a lower price instead of just making an extra profit at the taxpayer's expense (not that that is not anything new or unique).

It's all the same market.

Quote: Regardless of the amount of the reserves, it is not going to put a dent in global oil availability or affect global crude prices."

That's not the purpose of the reserve. The purpose is to temper the speculator effect on price spikes and to prepare for emergencies like hurricanes.

Whatever US stockpiles in oil, it would only be a fraction of worldwide supply and demand, and any effect it would have on prices in marginal and temporary.

Brooklyn · Joined: 03 Mar 2006 Posts: 1044 Location: New York City

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?