Strategic Petroleum Reserve
The administration’s recently proposed regulation for flexibly refilling the SPR is a welcome policy change with serious potential to deliver price and supply stabilization benefits.
The White House should not use the refining capacity crunch as a reason to avoid grappling with the fragile state of crude oil supply, as it appears to be doing. In gasoline and other refined products, there are two related but separable sources of scarcity: crude oil and refining capacity.
Creative production contracts involving the sale of put options (as we previously advocated for), could help set a soft “floor” on oil prices, preventing a large-scale return to consumer purchases of gas-guzzling cars.
Summary The Department of Energy (“DOE”) is about to engage in rulemaking to broaden the types of acquisitions it can engage in to help refill the reserve in a manner that is both cost-efficient and consistent with the broader goal of enhancing energy security. This rulemaking is a worthwhile opportunity
Since financial markets are complex and energy policy can be shrouded in legalese, it is worth taking a minute to translate some of the more abstruse language in the DOE’s announcement.
The recently-announced SPR release is the first step in a broader program to address oil price volatility in today's geopolitical environment.
Energy security has taken on new importance in wake of Russia’s invasion of Ukraine. We can use existing tools to confront these challenges without sacrificing our climate goals.
