All the Oil We Need?
The New York Times has a very interesting, and refreshingly unbiased (IMO), opinion piece today about how vulnerable the US really is to geopolitical causes of oil supply shocks. A key point:
Some policy makers and analysts worry that these emergency stocks are too small. For example, they sometimes compare the American strategic reserve to total American consumption, so the reserves appear dangerously inadequate. The United States consumes about 20 million barrels of oil every day, so the Strategic Petroleum Reserve could only supply the country for 35 days. (Furthermore, the United States could not draw oil out of the reserve at anything approaching a rate of 20 million barrels per day.) This is why President Bush in his 2007 State of the Union address called for doubling the strategic reserve.
But this vulnerability is a mirage. The size of plausible disruptions, not total consumption, determines the adequacy of global reserves. The worst oil disruptions in history deprived global markets of five million to six million barrels per day. Specifically, the collapse of the Iranian oil industry during the revolution in 1978 cut production by nearly five million barrels a day, and the sanctions on Iraq after its conquest of Kuwait in 1990 eliminated 5.3 million barrels of supply. If a future disruption were as bad as history’s worst, American and allied governments’ crude oil stocks alone could replace every lost barrel for eight months.
I found it to be a small haven for thoughtful and fact-based arguments and a good cautionary piece that reminds us not to get too wrapped up in the polemics of either party.
