Skip to comments.U.S. to lend Marathon 1 million barrels of oil
Posted on 09/02/2012 6:42:39 AM PDT by thackney
The U.S. Department of Energy will lend 1 million barrels of oil to Marathon Petroleum Corp. after the company requested it because of impacts related to Hurricane Isaac.
The government will lend the barrels from a Strategic Petroleum Reserve site in Louisiana.
Marathon will have to return the same quantity of oil within three months, plus additional premium barrels, which the department described as similar to interest.
The department said a loan is different from a release of the reserves, which the White House has said was an option if Isaac disrupted oil supplies and markets.
The reserves could begin delivering the barrels today, the department said.
Todays announcement is part of the broader federal effort to respond to those impacted by Hurricane Isaac, U.S. Energy Secretary Steven Chu said in a statement. This emergency loan from the Strategic Petroleum Reserve will help ensure Marathons refining operations have the crude oil they need to continue operating.
Marathon Petroleum Corp. began shutting down its Garyville, La., refinery Monday, one of the largest in the nation. The facility has a capacity of 490,000 barrels a day. It was running at reduced rates because of the storm.
Chu said the governments oil loan will include 1 million barrels of sweet crude.
Not as egregious as a general release to the market, but a bad precedent set treating the Strategic Reserve as a bank.
they must be expecting the price of oil to drop within the next 3 months...
right about the election
wonder how much the paid under the table.
I wonder how much Marathon donated to the Obomba campaign?
SPR does this all the time.
They didn't set the precedent.
Following a storm, this type of exchange, X barrels now, X + premium barrels returned later has been done several times before.
In my opinion, this exchange is what the SPR was set up to do. Provide oil in a timely manner following a supply interruption. There was a lot of the Gulf Shut down due to the Isaac. No major damage and the production platforms are coming back online, but they were shut down.
This type of exchange has been done several times before.
The offshore production was shut down 2~4 days. This is a reasonable request and has been done many times before.
1996 - April Pipeline Blockage, Seaway Pipeline System 900,000 bbls
1998 - August Maya Exchange 11,000,000 bbls
2000 - June Calcasieu Ship Channel Closure 1,000,000 bbls
2000 - August Establish NEHHOR 2,836,000 bbls
2000 - October Exchange 2000 30,000,000 bbls bbls
2002 - October Hurricane Lili 98,000
2004 - September Hurricane Ivan 5,400,000 bbls
2005 - September Hurricane Katrina 9,800,000 bbls
2006 - January Barge Accident, Sabine Neches Ship Channel 767,000 bbls
2006 - June Calcasieu Ship Channel Closure 750,000 bbls
2008 - September Hurricanes Gustav and Ike 5,389,000 bbls
These types of exchange are fine. It is the sales that are wrong in my opinion. The government should not sell off our reserve, but using the reserve following an interruption is appropriate.
This is kinda like borrowing from your kids piggy bank.
According to the article, this oil is going to a refinery. Seems more like two days of "supply".
Yeah, scratch my #14.
My nose is just outta joint today.
Was there ever any doubt that Obama would find some way finagle a release of oil from the reserve?
There at set rules which companies can request a release following an interruption in the oil supply. Delivery of oil to some refineries was shut down with Isaac. Heck, there was even a refinery in Tennessee that had a shutdown due to lack of delivery of oil from the Gulf.
You haven't convinced me that Obama and Salazar are acting out of the good of their hearts. I suspect something underhanded.
This isn't new and was done long before Obama was in office.
It cannot be done without an interruption is supply. The refinery had some, possible all, of their sources of oil interrupted when the offshore platforms shutdown for a few days with Isaac plowing through the area.
The amount loaned is about a two day supply for the refinery and they have a set amount of time to return the same amount of oil, plus a premium of additional amount to “pay” for the loan.
Here is announcement from Institute for Energy Research on this loan. As you can tell, they are no friend of Obama and believe he would use the SPR to raise his chance at a 2nd term.
But even in making that clear they don’t trust him, they do point out that this loan is appropriate. It is what the SPR was created to do: replace oil supply interruptions.
IER Statement on Post-Isaac SPR Loan
The Institute for Energy Research issued the following news release:
Following reports that Energy Secretary Steven Chu approved a loan of 1 million barrels of sweet crude oil from the Strategic Petroleum Reserve to the Marathon Petroleum Company, Daniel Kish, IER’s Senior Vice President of Policy, released the following statement:
“Ensuring a stable provision of crude oil to refiners in the aftermath of national disasters or global supply disruptions is the purpose of our Strategic Petroleum Reserve. Today’s announcement that Energy Secretary Steven Chu has authorized a loan to maintain refining capacity along the Gulf Coast in the aftermath of Hurricane Issac represents an appropriate action by federal authorities. Regrettably, the Obama administration has previously shown a willingness to use SPR to achieve political ends, and to date the administration has not replenished the 30 million barrels released for such purposes last year.
The message from the Obama administration is clear — strategic reserves may be loaned under strict terms to refineries in the event of national disasters, but they may also be used to shore up President Obama’s approval ratings amid rising gasoline prices. While today’s announcement is appropriate, earlier administration actions with respect to our domestic oil resources — including but not limited to last year’s SPR release — reveal a disturbing trend: rather than an opportunity to promote energy independence and security, the White House appears to view America’s vast energy resources through the lens of pollsters and election advisors.”
Not trusting Obama is wise. I don't either. But recognizing this was an interruption in our nations oil supply, the purpose of having the SPR is important.
When not to tap the emergency oil reserve
A hurricane just blew through the Gulf Coasts refinery row. Gasoline prices are up. Its Labor Day weekend and its an election year.
Time to tap the Strategic Petroleum Reserve. Which is what has just happened.
The Energy Department announced Friday that it made an emergency loan to Marathon Petroleum Co. (US:MPC) The company, at its own request, is receiving 1 million barrels of crude from the nations emergency stockpile of 727 million barrels. Read more about the loan.
In this case, the transfer seems to be a perfectly rational move. Marathons Garyville, La.-based refinery is operating at reduced rates following Hurricane Isaacs romp through the neighborhood. The problem appears to be getting crude to the plant, which is understandable given all the storm-related production and pipeline outages this week in Louisiana.
A small, timely loan from Uncle Sam can go a long way toward preventing a regional spike in fuel prices.
Lets hope it ends there. But you never know. The temptation to release more oil must be enormous.
Every time gasoline prices get uncomfortably high that discomfort level currently seems to be $4 a gallon politicians get an itch to tap the SPR. Nothing buys votes like cheap gasoline.
Presidents who have ordered oil released from the SPR include George H.W. Bush (21 million barrels during Desert Storm), Bill Clinton (28 million barrels, and not in an emergency but as an opportunity for the government to cash in on rising oil prices); George W. Bush (11 million barrels in 2005 to calm the market after Hurricane Katrina); and Barack Obama (30 million barrels last year when the Arab Spring arrived in Libya).
The White House is reportedly reviewing plans to release more oil from the SPR should tensions suddenly flare up in the Middle East. Thats a legitimate concern, especially if a Western-led boycott of Iran triggers a genuine supply shortage.
Whats not as legitimate would be tapping the SPR for political gain.
There are differences between severe supply disruptions, economic relief and politically expediency. Sometimes they overlap. Emergency oil reserves need to be kept for true emergencies. Most folks know the difference.
But most folks also vote their pocketbook and could be coaxed into overlooking the difference, especially when tanking up for a three-day weekend. Its exactly that kind of thinking that has a lot of people in the oil market speculating that the president is edging closer to a bigger SPR release.
The timing is totally wrong, though. Relief at the gas pump typically lasts only a few weeks, and its still two months until the election. Besides, the fallout from such an overtly political gesture could backfire big time, even if briefly popular with consumers
So dont count on it. A million-barrel loan to a Louisiana refinery works just fine. Justifying any more requires a real emergency.
- - - - - - - - -
It takes a few days to get everything back online even without major damage. Today, Sept 2nd, there is still production shut down.
BSEE Tropical Storm Isaac Activity Statistics: September 2, 2012
Based on data from offshore operator reports submitted as of 11:30 a.m. CDT today, personnel remain evacuated on a total of 131 production platforms, equivalent to 21.98 percent of the 596 manned platforms in the Gulf of Mexico. Production platforms are the structures located offshore from which oil and natural gas are produced. Unlike drilling rigs, which typically move from location to location, production facilities remain in the same location throughout a projects duration
Personnel remain evacuated from 18 rigs, equivalent to 23.68 percent of the 76 rigs currently operating in the Gulf. Rigs can include several types of self-contained offshore drilling facilities including jackup rigs, submersibles and semisubmersibles.
As part of the evacuation process, personnel activate the applicable shut-in procedure, which can frequently be accomplished from a remote location. This involves closing the sub-surface safety valves located below the surface of the ocean floor to prevent the release of oil or gas. During previous hurricane seasons, the shut-in valves functioned 100 percent of the time, efficiently shutting in production from wells on the Outer Continental Shelf and protecting the marine and coastal environments. Shutting-in oil and gas production is a standard procedure conducted by industry for safety and environmental reasons.
From operator reports, it is estimated that approximately 71.50 percent of the current daily oil production in the Gulf of Mexico has been shut-in. It is also estimated that approximately 55.62 percent of the current daily natural gas production in the Gulf of Mexico has been shut-in. The production percentages are calculated using information submitted by offshore operators in daily reports. Shut-in production information included in these reports is based on the amount of oil and gas the operator expected to produce that day. The shut-in production figures therefore are estimates, which BSEE compares to historical production reports to ensure the estimates follow a logical pattern.
How big of a check did Marathon have to write to the DNC coffers?
Read the rest of the thread. This loan of oil is an appropriate use of the SPR.
This government doesn’t do anything without strings attached.
You are right. They have to give back more barrels of oil than they borrow. Just like the 11 times when this was done before, including during President Bush’s administration.
Not saying it isn’t legitimate for SPR to do this, but I suspect Marathan had to grease somebody’s wheels to get it.