Tuesday, April 25, 2006

Strategic Oil Reserve

President Bush has announced that he's deferring contracts to fill the Strategic Oil Reserve "in order to get more oil in the market and help reduce rising gasoline prices".

Since everything he says like this is a lie or misdirection, I wondered what was going on here.

The Strategic Oil Reserve is normally filled with "royalties in kind" (ie. a percentage of oil pumped from US-owned oil fields.)

It looks to me as if he's allowing the oil companies to profit from selling US-owned oil at extremely high prices, and they will then give us some oil later when the prices are low. In other words, it's another gift to oil companies. If instead the US accepted ownership of the oil owed to the government and sold it immediately, the treasury would benefit instead of the oil companies.

I'm open to evidence this isn't what's happening, but I'm so pessimistic about the Bush presidency that it's the sort of corruption I expect.


John said...

The operative question is the nature of the U.S. "ownership" of royalties that are deposited into the Strategic Oil Reserve. I am not an expert on the matter, but can only presmue it is purely confiscatory. The U.S. taxpayers don't purchase oil that the big bad Bush administration returns free of charge to Exxon to sell all over again. They are merely relinquishing their power (temporarily) to confiscate a portion of the limited supply of oil that the "oil companies" discover, drill, and refine.

The touchstone of "ownership" is the right to exclude. Government certainly has the authority to do so - but it takes a truly commited "anti-libertarian" to contend in earnest that the failure of the king to confiscate is a windfall for the rest of us. And these same people have the audacity to complain about the corruption of the Bush Presidency? Keep it up, Mike!

Quillian said...

"Royalty oil is owed to the U.S. government by operators who acquire leases on the federally-owned Outer Continental Shelf. Under current law, federal ownership ranges from 12.5 percent to 16.7 percent of the oil produced from federal leases." Might want to check some facts prior to presuming.

The royalty is not owed to the government as a confiscation, but as a standard royalty. So yes, in fact, this is a benefit for the leasee who is getting to sell at a higher price and later replace the oil when the price is lower. Prior to the filling of the strategic reserves, the royalty was collected in cash, btw.

D.R.M. said...

Just out of curiosity, have you seen this partisan ranting on a study?