Oil Reserve Decision Makes Sense

Pay attention folks...because I'm only going to say this once...my initial assessment of the president's decision to release oil from the reserve was in error.

From Yahoo News:

At least 20 oil rigs and platforms are missing in the Gulf of Mexico and a ruptured gas pipeline is on fire after Hurricane Katrina tore through the region, a US Coast Guard official said.
...
According to the latest tally Wednesday from the federal Minerals Management Service, a total of 561 platforms and rigs have been evacuated in the Gulf of Mexico, which accounts for a quarter of US oil production.

Over 91 percent of normal daily crude oil production in the Gulf -- 1.5 million barrels -- is now shut down, and more than 83 percent of natural gas production, the MMS said.

Our largest supplier of foreign oil is Canada, which provides 2 million barrels a day. With the shortage of 1.5 million from the affected region out of the mix, we will have an effect on the supply.

The president made the right call and for the right reason.

I will, however, point out this:

The decision to open the US petroleum reserve calmed prices Wednesday, but analysts said the government's move would make little difference and prices could easily rebound.

"It is unknown how extensive the damage to the refineries is," said Tony Nunan, manager for energy risk management with Mitsubishi Corp's international petroleum business in Tokyo.

"If you don't have enough refining capacity, it doesn't help you with the crude oil," he said.

We still need to do something about the refinery problem.

Tom's Contribution

Updated 12:00pm
Good points, Matt. I did some research after I read the post and the comments by Tomas Chocolate. Your previous post made me want to find out the true purpose of the SPR - look here and see it was originally an economic strategy. Military Fuel reserve was a secondary purpose. You'll also see there was a Military reserve started by Presidential order called the Naval Petroleum and Oil Shale Reserves. Kinda cool stuff there.

It is true that US Crude Oil production has decreased in the past twenty years, but that decrease was suplimented by increase crude Imports. Refinement on the other had HAS increased to meet consumer demand. I am still looking for exact numbers, but here is an excellent source of information - Click Here. (There are some easy to read graphs and charts here for you, Matt ;-)

I also found the Energy Information Administration's Short Term Energy Forecast. I expect these numbers to change soon thanks to Katrina's Influence.