“There is evidence that experience reduced the scope and se­verity of earlier errors [with the Strategic Petroleum Reserve]–that the 1981–84 perfor­mance was superior to the 1977–79 performance. But new facets of the pro­gram have brought new problems.”

“Combined with the $5 per barrel handling and storing expense [as of 1984], the overall market value of SPR oil is billions of dollars less than its embedded average cost of over $35 per barrel.”

A sacred cow of U.S. energy policy is the Strategic Petroleum Reserve. The case for the reserve assumes that another energy crisis lies around the corner, the reserve will be efficiently managed during the crisis to alleviate the emergency, and private inventories and entrepreneurship alone would be inadequate. The reserve is seen by proponents as the nation’s insurance policy against the inherent instability of the world oil market.…

“In the first week of the program, three sites in Louisiana were acquired by the Corps of Engineers by emi­nent domain. Pipeline right-of-way was similarly acquired; appraisals below industry standards made condemnation necessary. This, however, did not reduce costs or trim start­-up time as intended. The associated legal proceedings increased costs and created delay, and condemnation set the stage for polit­ical trading between Louisi­ana and federal officials in Washington, D.C.”

In the first decades of the twentieth century, fears of an imminent exhaus­tion of oil led to petroleum land withdrawals and the reserva­tion of oil-rich acreage for future military use. Four Naval Petroleum Reserves were set aside between 1912 and 1923. [1] With the discovery of major new oil fields in Oklahoma, Texas, and California in the late 1920s, the new fear – at least for the vested parts of the oil industry – became oversupply.…

The Strategic Petroleum Reserve (SPR) is in play. The 695 million barrel inventory, stored in four storage locations in Texas and Louisiana with a capacity of 713.5 million barrels, never found its purpose; it is still waiting for the third oil crisis (after the 1973/74 Arab Embargo and the 1979 Iranian Revolution). Not surprisingly, the SPR is on the verge of becoming a piggy-bank offset for lawmakers. At $50 per barrel, SPR inventory is worth about $35 billion.

This week, MasterResource reviews the history of state and federal oil (and natural gas) storage regulation and ownership. Part I today is early (pre-SPR) regulation. Part II tomorrow will review the prehistory and beginnings of the SPR.

Part III will examine early problems with the federal storage program; Part IV early fill and financing controversies.…

“Forced use of higher-cost U.S.-flag vessels has benefitted domestic water carrier firms, shipbuilding companies, and associated labor. This advantage, however, has been diluted because inflated shipping costs has reduced the attractiveness of barge and tanker transport compared to other alternatives.”

The current debate over legalization of oil exports is intertwined with cabotage (water vessel) protectionism. The previous two posts (Part I; Part II) examined the history of oil-export regulation by the federal government; this post surveys water-vessel restrictions from Washington, D.C., that directly or indirectly impact the oil trade.

In 1808 and 1817, the United States passed legislation reserving coastwise and intercoastal trade to U.S.-built and registered vessels. [1] Section 27 of the Merchant Marine Act of 1920, commonly known as the Jones Act, reaffirmed this policy and extended it to the noncontiguous U.S.…