Wednesday, April 26, 2006

Thanks for close to nothing, Mr. President

President Bush announced yesterday that, in order to provide consumers some relief from high fuel costs, he has ordered the government to defer purchases of crude oil for the nation's Strategic Petroleum Reserves (SPR) "until the fall."

"Every little bit helps," said the President.

Just how little a bit are we talking about? Here are my back of the envelope calculations.*

Rate at which US usually adds to the SPR (the "SPR fill rate"): varies, but approximately 2 million barrels per month, or roughly 67,000 barrels per day.

US demand for oil: approximately 20 million barrels per day

US SPR fill rate as a percentage of US demand: 0.34%

Worldwide supply of oil: very roughly, 80 million barrels per day

US SPR fill rate as a percentage of worldwide supply: 0.08%

So in effect the President is saying that we are going to: 1) increase the available supply of oil worldwide by less than 1/10 of one percent; and 2) decrease US demand for that supply by less than 1/2 of one percent. And that will lead to lower gas prices.


So, let's just assume that the impact of this measure goes straight to the gas pump, because:

- oil sheikhs, ever so sensitive to a minute change in demand from the Great Satan, immediately panic and reduce their prices;

- oil companies, though rapacious by nature, somehow act completely out of character and instantly pass this savings on to consumers at the gas pump. (This despite the fact that crude oil accounts for less than 50% of the cost of a gallon of gas. Transportation, refining, marketing, taxes and um, embarrassingly large profits comprise the rest.)

Okay, we can probably agree that in order to believe that the foregoing assumptions are at all realistic, some drugs that are not covered by Medicare would be required.

Even so what would be the savings to consumers? 1%? Here in San Francisco, that would translate into about $0.03/gallon. $0.50 each time you fill up. Say you fill up twice a week? That's a dollar. By the end of the summer, you will have saved maybe $16.00.

Huzzah! It's a windfall! Fire up the Escalade, honey! We can go visit your parents afterall!

*I am not an economist, not even remotely close. I'm just a guy with a blog and broadband access.


At 12:59 PM, Blogger OneBadSue said...

Too effin' true. Let's all move to Germany where the public transit and bike lanes are fully functional.

At 8:55 PM, Blogger leomange said...

good breakdown from the novice. i knew my initial reaction of "BFD" was accurate, i just didn't have it in me to investigate why.


At 6:33 AM, Blogger Changeseeker said...

I'm starting to look at ways I could learn to just do without The Car. Think I'll park this summer while I'm not teaching and save way more than $16. Thanks for helping me come up with that idea.

At 8:14 PM, Blogger princess slea said...

This comment has been removed by a blog administrator.

At 8:16 PM, Blogger princess slea said...

I feel very fortunate that I live in a small town and can literally walk or ride my bike everywhere I need to go.

leo, your comment made me laugh out loud.


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