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Comment by markdown | Hacker News Reader

At the risk of sounding stupid, I have to ask...

Would it be possible to simply pump the oil back into the ground wherever the closest oil field is?

In an arrangement with the US Government it could be put into the ground, elsewhere. Doing it without state permission would be an entirely different matter however. I'm not aware of any very large, privately owned underground storage caverns (such that they could make a dent in absorbing the over-supply).

This is being discussed:

"The U.S. Energy Department is negotiating with nine companies to rent about 23 million barrels of oil storage capacity in its Strategic Petroleum Reserve as part of a Trump administration bid to help drain the country’s growing glut of crude."

https://www.worldoil.com/news/2020/4/14/doe-working-to-lease...

Here is what the US Strategic Petroleum Reserve looks like (it can absorb some of our over-supply briefly):

> Four underground salt caverns on the coast of the Gulf of Mexico store the oil. That's a central location. The oil can be distributed to nearly half of the U.S. oil refineries either through interstate pipelines or via barges. It only takes 13 days for the oil to enter the U.S. market from the time the president first gives the order.

> There are two cavern locations in Texas. As of September 30, 2018, Bryan Mound held 235.3 million barrels in 20 caverns. Big Hill held 153.4 million barrels in 14 caverns. The other two are in Louisiana. West Hackberry held 199.5 million barrels in 22 caverns. Bayou Choctaw held 71.88 million barrels in 6 caverns.

> The maximum capacity of all four caverns is 727 million barrels.

There is also a good FAQ on it:

https://www.energy.gov/fe/services/petroleum-reserves/strate...

Why don't we just take delivery of futures contracts directly? Isn't this a great time to fill the reserve?

it is and we do.

Already being done, and that space too is running out.

Pelosi blocked that.

The workaround is to cheaply rent out the reserve as storage space, with the hope that someday a better congress will allow purchasing the oil.

>Pelosi blocked that.

Why should the American people pay to fill it when they can now be paid instead to store the oil? The market's decided that the toxic asset needs to go somewhere and the speculators that bought it (not the producers) will pay.

>The workaround is to cheaply rent out the reserve as storage space

Cheaply? They took a risk in speculating and it didn't work out. The solution is to give them a choice: surrender their oil to the USG (to avoid paying storage fees) or pay the USG for the service of storing it.

No bailouts, fuck that.

I can understand the impulse, and absent any middlemen it would make perfect sense to have the government step in to buy excess production during a crisis to fill national reserves.

But we have speculators who sold us the idea that their profits brought stability to the market, so make them keep playing by their own rules.

Bailout?

It's not a bailout. Prices were negative! We'd literally be _getting paid_ to take oil and put it into our reserve. It's literally the easiest financial decision on the planet.

The fact that Pelosi blocked it demonstrates a fundamental lack of understanding of basic finance.

Hm, I can't find any sources to this effect. Have one? I vaguely recall a bit about paying over market for petroleum to refill the reserve, with the idea being we fill a demand and prop up the gas industry.

McConnell proposed it in the coronavirus stimulus bill but it wasn't in Pelosi's version.

So frackers have to deleverage all by themselves? Cry me a (unpolluted) river.

The USG can top off the reserve at any time and it'd be chump change. They're spending trillions of dollars these days. They're not concerned with a few billion dollars worth of oil here and there.

With negative prices, it's literally the dumbest financial decision not to take the oil - whatever the quantity we're talking about.

The reserve is already 90% full.

I am curious, dohappen to have a source for that statement?

Capacity of 717 million barrels. [1]

Inventory of 635 million barrels. [2]

635/717 = 88.5%

[1] https://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve_(U...

[2] https://www.spr.doe.gov/dir/dir.html

10% of the capacity at what was NEGATIVE $30 per barrel is still a lot of extra money for doing literally nothing.

Anyone not filling any available storage is a huge idiot.

I love this question! Mainly because first I laughed at "But that would be silly -- we spent all this effort taking it out of the ground", but on second thought it represents a reasonable thought of "We got it from the ground, therefore the ground isn't the worst place for this stuff maybe?".

In crux, thanks for asking :)

Doesn't the oil just come out of the oil well from its own pressure? Which would make pumping oil back in the oil field complicated

In some places, yes, but would you see these pumps the US if that were always the case?

https://youtu.be/X0Dpd52pfp0

There's lots of empty oil fields out there though. Many of them could hopefully be refilled just using gravity?

Reconfiguring wells to reverse flow is a lot of work, and would take a significant amount of time to setup. This can happen with old gas wells, excess gas can be compressed and reinjected into the well, but they are specially designed systems.

The US Strategic Petroleum Reserve is stored underground, surely they could build a similar reservoir

You could. Though it’d cost billions of dollars and would not be done by the time the contracts expire and deliver needs to be taken.

That sounds like it'd get the EPA involved if you just dumped it, and I would expect that putting oil into an actual oil well is not easy.

Actually with LP gas that's a pretty common storage method in Michigan.

https://www.mlive.com/news/2016/01/michigan_has_most_undergr...

Also there's some underground cave like structures East of Grand Rapids where they store fuel as well.

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