Sell-Low Trading Strategy Seen in Congress’s Oil Reserve Sale

Jul 23, 2015 11:00 AM EDT

U.S. lawmakers may not have a future as oil traders.

The idea of selling off some crude in the U.S. emergency stockpile to raise money for programs is gaining currency in Congress even though per-barrel prices are half of what they were a year ago.

“It’s a bad idea regardless of price,” said Guy Caruso, a former administrator of the Energy Information Administration, which tracks and analyzes U.S. energy data. “It’s made even worse by the timing.”

The latest would-be raiders of the Strategic Petroleum Reserve are Senate Majority Leader Mitch McConnell, a Kentucky Republican, and Democrat Barbara Boxer, a California Democrat, who want to help pay for a $47.1 billion, multiyear highway bill.

Critics including oil analysts and other lawmakers say using the underground crude reserve as a piggy bank makes it less effective in meeting its intended purpose: to make up for a “severe energy disruption.” What’s more, the government would be selling at a time when oil is unlikely to have recovered from its precipitous fall from highs last year.

The proposal calls for selling 101 million barrels over an eight-year period ending in 2025 to raise $9 billion for highway spending. That works out to $89 a barrel, well above $49.21 price at 10:55 a.m. Thursday. A year ago, oil traded at $104 a barrel, but an oversupply has cut prices by half.

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http://www.bloomberg.com/politics/articles/2015-07-23/sell-low-trading-strategy-seen-in-congress-s-oil-reserve-sale