Well, if I am understanding Manny and what I have read on the subject, some oil is lent out to various refineries and those refineries have to later pay back that oil plus a bit extra. I see this as no different than you putting you money in the bank and the bank then lending it out at interest. It is STILL different than "tapping the reserve" at which point the oil would be sold to refineries at a certain price.
Mostly. But the President still has to make a specific finding about a supply shortage to make loans which have the effect of depleting the reserve (which finding the President did make in the aftermath of Katrina and Rita). He does not have to make a similar finding to renegotiate the payment terms.
Now, there's a different kind of loan program which the Energy Department can make without going to the President -- I forget whether the Secretary has to approve such loans or whether they can be done at a lower level. In those cases, the SPR loans oil to a specific locality to counter a short-term local supply shortage. One example was when some freighter dropped some pilings in a bay somewhere, closing it to marine traffic until things got cleaned up. The SPR loaned the local oil terminal crude because they couldn't receive crude coming in by tanker. The terminal, in turn, had to arrange for simultaneous or near-simultaneous delivery at another location (basically, send the incoming boats to another SPR location).
The difference being that the government gets the cash but not necessarily oil (and, if I understand this correctly, it would be sold at below market value, so the cash would be insufficient to restock it) thus depleting the reserves in a more permanant way.
Nah, the oil sales are at market. The whole "not less than 95%" thing is just to protect the poor Energy Department bureaucrats from ending up in front of Congress if they happen to make a bad trade in a volatile market. But yes, cash sales expose the SPR to price risk (both up and down) whereas in the case of loans the risk lies with the recipients -- the Energy Department made a good bet last year.
DavidJames said:
Ah, "one of those inarticulate moments." That would certainly make sense, at least in isolation. But if it were in isolation the flip-flop charge would never have stuck. This is a guy who voted against the first war, for the second, said he'd never vote to restrict funding for a war he'd voted for, voted for funding, voted against funding, said that even with the knowledge of no WMD that he'd have voted for the war authorization, said that with the knowledge of no WMD he would not have voted for the war.
The contrast between all that mess and believing that there did not exist sufficient supply disruption to justify a Presidential finding to draw down the SPR in 1999 and believing that there does exist a supply disruption now but not a sufficient one to justify the Presidential finding is just too huge for a sane, honest person to make a comparison.
One error from earlier: I said the SPR was only statutorially authorized to 700 mm bbls. In fact, the '05 energy bill authorized the President to take it clear to 1 B bbls as soon as the capacity exists. Theoretically, he could top it off to 727 mm bbls while the capacity increase is ongoing. So while there are certain practical arguments against doing that, there is not a statutory reason not to.
One additional possible error: I may have invented the term "statutorially" from whole cloth.
