The Strategic Petroleum Reserve (SPR) was created during the Ford administration in response to the 1973-74 Arab oil embargo.
Barrels started moving into the reserve in 1977 during the Carter administration, to which a total of 108 million barrels moved in by the time Carter left office in 1981.
Through the next eight years of Reagan’s two terms, another 452 million barrels were added. Then through the first two years of GH Bush’s term, 26 million barrels went in. The SPR hit 586 million barrels in 1990.
For the first time since inception, barrels moved out of the SPR in 1991 as we saw a net decline of 17.2 MMbbls in the wake of the first Gulf War. Barrels were then added in 1992 bringing the net build under GH Bush’s one term in office to 15.2 MMbbls.
Thus, three Administrations (one Democrat and two Republican) and three (bi-partisan) builds in the SPR. The Clinton administration added 17 MMbbls in the first two years… and then the games began.
In 1996 we saw a total of 25.8 MMbbls withdrawn from the reserve. Got that? Clinton took out 50% more oil from the SPR in the lead up to the mid-term elections than Bush did while Saddam Hussein was torching Kuwaiti oilfields!
Over the next three years we saw a small net build of 1.4 million barrels, but once again, in 2000 the Administration withdrew 26.7 million barrels in a thinly veiled attempt, in our view, to help get Al Gore elected. Thus, the fact that Mr. Global Warming now rails against the evils of Big Oil is absurd.
All told, in Clinton’s eight years a net 34.1 million barrels of oil was drawn down from the SPR. The fact Nymex crude oil averaged $20.19 a barrel through his time in office (Feb-1993 to Jan-2001) is less like a joke and more like a crime, in our opinion.
This brings us to the present. With oil virtually brimming over at the Nymex delivery hub in the U.S. Midwest, the Administration wants us to know it is ready willing and (unfortunately) able to release barrels from the SPR.
As discussed in today’s issue of The Schork Report, the markets do not need a token gesture. Rather, we need to see a coherent strategy on how Washington plans to encourage domestic oil and gas drilling.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.
