Publications: Notes at the Margin

Strategic Sense (November 2, 2015)

 

The United States Congress last week addressed the US budget deficit and the debt limit. With luck, these issues will not arise again until 2017. One element in the agreement involved the Strategic Petroleum Reserve. As part of the deal, Congress called on the Obama administration to begin selling oil from the SPR. Critics point out that the United States might lose money by selling oil now because the government bought high and would be selling low. This view reflects an ignorance—the one thing the naysayers have in abundance—regarding what the United States paid for the oil and the role of strategic stocks. But the price is irrelevant. The critics are unaware that every nation in the world has almost certainly lost money on strategic stocks and that the loss has nothing to do with the security gained from holding reserves. This report discusses the topic in detail.

 

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