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Trump Keeps US Oil Reserve in Back Pocket as Pump Prices Climb

Trump Keeps US Oil Reserve in Back Pocket as Pump Prices Climb
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Friday, 06 July 2018 03:58 PM

If U.S. President Donald Trump wants to lower pump prices, he doesn’t have to rely on OPEC. He has a 660-million-barrel emergency oil stockpile at his disposal.

Releasing some of that crude in September or October could dampen gasoline prices ahead of November mid-term elections. Trump could also use it as a tool to persuade buyers of Iranian oil to halt their purchases in the run-up to Nov. 4, when U.S. sanctions against the Islamic Republic are due to snap back.

“For the Trump administration negotiating with Iranian crude buyers, it’s probably strategically more useful for them to offer an SPR draw as a compensating force for market tightness,” said Kevin Book, managing director of Washington-based consultancy ClearView Energy Partners.

A modest drawdown is on the horizon. Congress has already mandated the sale of 11 million barrels starting as soon as Oct. 1, and a government spending bill before Congress now could add another 4 million barrels to that count. But Trump has emergency authority to unleash up to 30 million more barrels onto the market.

“Forty-five million barrels hitting the market in relatively short order would be a big deal,” Book said.

Market Effect

Tapping the reserve in conjunction with other nations to offset lost Iranian barrels may be a legitimate use of the stockpile, but would only provide short-term relief, said Robert McNally, former energy adviser to President George W. Bush and the president of consulting firm Rapidan Energy Group.

“Washington cannot stabilize the global oil market with the SPR,” he cautioned. “If it chooses to use the SPR to fight fundamental forces, it may win temporary, short battles but it will lose the war.”

Depending on its size and timing, an oil sale might leave the market unmoved, or have a real, if fleeting, impact on prices.

“When the SPR sale comes in the face of real tightness -- good examples of this are Katrina, the first Gulf war -- the price response is pretty dramatic even if short-lived,” according to Book.

Former Energy Information Administration Chief Guy Caruso is more skeptical. “It’s not enough oil to make a big difference on the global market,” he said.

Energy Secretary Rick Perry last week dismissed the notion of releasing oil from the Strategic Petroleum Reserve, or SPR, in response to Iran, but the decision will ultimately be the president’s. In the past, Perry and Trump have taken opposing positions on the role of the reserve, with Trump proposing to sell off half of the stockpile to cut the deficit.

The Department of Energy didn’t respond to a request for comment.

It may be too early to speculate on what the administration will do, said Caruso. "A big part of it would be to see what the Saudis do and, secondly, how much of the Iranian exports are actually diminished by the sanctions."

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If U.S. President Donald Trump wants to lower pump prices, he doesn't have to rely on OPEC. He has a 660-million-barrel emergency oil stockpile at his disposal.
trump, oil, reserve, pump, prices, crude
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2018-58-06
Friday, 06 July 2018 03:58 PM
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