Saudi-Russian War on Shale Forces Trump Into Emergency Purchases in Desperate Bid to Shore Up Price
The bailout of the oil bubble has begun
Editor’s note: 92 million barrels works out to just $3 billion. It won’t do much. This is just the start.
President Trump said Friday that he would buy enough oil to fill up the Strategic Petroleum Reserve in an effort to bolster crude prices and shore up the financial condition of U.S. oil drilling companies.
The decision will allow the federal government to purchase up to 92 million barrels, enough to buy the entire output of Texas in approximately 18 days. The Strategic Petroleum Reserve, held in salt caverns in four locations near the Gulf of Mexico, currently holds 635 million barrels but can store as much as 727 million barrels.
By buying oil in an emergency rather than selling it, the move runs contrary to the original purpose of the Strategic Petroleum Reserve, which was created by President Gerald Ford in 1975 as a response to the Arab oil embargo in 1973-1974. That embargo, by cutting back supplies, sent crude prices soaring and the United States, then a major importer, faced shortages and gas rationing.
In this case, the government is buying oil to bail out domestic oil companies when prices are collapsing rather than selling oil to protect consumers when prices are soaring.
Source: The Washington Post