Discussion about this post

User's avatar
Michael's avatar

This is maybe the most disappointing post in Slow Boring history because the Biden Admin has a policy around refilling the SPR and... one would never know that from reading the post.

https://www.whitehouse.gov/briefing-room/statements-releases/2022/07/26/fact-sheet-department-of-energy-releases-new-notice-of-sale-as-gasoline-prices-continue-to-fall/

"The Administration is also moving forward with a proposal to allow fixed-price forward purchases of crude oil to replenish the SPR and encourage short-term production. Relative to conventional purchase contracts that expose producers to volatile crude prices, the fixed-price contracts can give producers the assurance to make investments today, knowing that the price they receive when they sell to the SPR will be locked in place, providing them with some protection against downward movements in the market. This proposal, if finalized as proposed, would encourage near-term production, promote market stability, and put the federal government in a better position to respond to future market volatility.

The Department of Energy is proposing rulemaking this week that would allow for these purchases. The new rule, if finalized as proposed, would enable the Department to enter into purchase contracts for future delivery at a fixed price. Under current regulations, the Department can enter into contracts for future delivery, but the price paid reflects prices at the time that product is delivered. By instead allowing for the price to be fixed at the time the transaction is executed between the parties, this regulatory change would provide greater certainty to producers regarding the revenues they could expect to generate if they produce more crude oil in the short-term, knowing that the Department has contracted to purchase these barrels at a previously agreed-upon price to replenish reserves.

Importantly, the actual delivery of these volumes back to the Reserve will not take place until well into the future, likely after FY 2023. This means that the repurchase agreements will encourage greater near-term investment in supply but will not raise demand for barrels now or in the near-future."

I guess Matt is assuming that his readership is aware of the Biden Admin repurchasing plan and this column is intended as a revision. But I think it is beneficial, when advocating a policy change, to say what the current policy is first.

BTW, as someone who wants to see Democrats win in November, I don't think the Biden Admin should be taking steps to drive oil prices UP before election day.

Expand full comment
David R.'s avatar

I’d think their motivation in dithering is clear enough: they’re hesitant to put any upward pressure on oil prices before the midterms.

Expand full comment
116 more comments...

No posts