Hacker News Reader

Comment by perihelions | Hacker News Reader

The US burned half of its stockpile in the last four years[0], as a (politically popular!) counter to inflation. It's as the parent comment says: we're presently infected by short-term thinking, exchanging gigantic risks in the future for small benefits in the present.

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

View on HN

Keep in mind that the US is the worlds largest oil producer right now, and exports ~30% of production. North America as whole has a serious oil output that massively over-serves what is needed by the continent.

Canada, arguably the closest US ally, is number 4 for oil output, and Mexico is 11th.

Keeping the reserves full doesn't really serve a purpose when you are capable of producing far more than you need.

The US is a net petroleum exporter now, so using the stockpile for price stabilization is the right call.

Using it to stabilize prices is actually good long term thinking, because a quicker reduction in inflation will have far more long term benefits than the short term optics of liquidating a ""strategic asset"".

The only risk of a strategic petroleum shortage in the US would be as the result of an attack on US infrastructure, and I don't see how the petroleum reserves wouldn't be the first target. So there isn't any strategic risk in reducing the stockpile. When it was created, the US was a massive petroleum importer - it was a strategic asset but not anymore.

We’re the largest producer of petroleum on the planet. China is not.

Conversely, China is the largest producer of EVs on the planet, and will reach peak oil demand this year or next due to their EV manufacturing ramp rate.

China is playing to win the future, and it’s clear in how they operate.

> China is the largest producer of EVs on the planet, and will reach peak oil demand this year or next due to their EV manufacturing ramp rate

Sure. They have a strategic incentive to electrify their military. In the meantime, they need stockpiles.

Maybe we’re talking past each other. China isn’t electrifying their military, they are electrifying all light transportation. This destroys demand for oil, slowly working towards negating it as a point of leverage during a geopolitical conflict. You can’t embargo, blockade, or use economic sanctions on an input a country doesn’t need.

Oil demand destruction, EVs, renewables, are all national economic security issues. They are stockpiling, decoupling, and becoming self sufficient internally to be prepared for an isolationist period. We can wildly speculate why, but it’s very clear that they do not want to be beholden to other nation state economic counterparties.

> it’s very clear that they do not want to be beholden to other nation state economic counterparties

Days of stockpiles aren’t a strategic economic buffer. They’re tactical. You’re correct that electrification reduces one of China’s geostrategic vulnerabilities. I’m extending that to its military; stockpiles alone won’t defeat a blockade.

Commoditise your complements.

Just like the markets in the West, the chinese market for EVs is saturated. That's why they have to ship their EVs to Europe before they have a buyer.

There is a market clearing price at which even the most opposed EV buyer becomes one (total cost of ownership, fuel cost volatility, etc). The subsidies must last only until sufficient internal combustion manufacturing capacity has been reduced to where EVs become the only option. Like bankruptcy, this transition will happen slowly, and then all of a sudden (as there is a minimum volume of units a combustion vehicle factory must sell to remain viable).

> The Chinese auto industry is experiencing a revolution,” said John Zeng, the director of Asia forecasting at GlobalData Automotive. “The old internal combustion capacity is dying.”

> Sales of gasoline-powered cars plummeted to 17.7 million last year from 28.3 million in 2017, the year that Hyundai opened its Chongqing complex. That drop is equivalent to the entire European Union car market last year, or all of the United States’ annual car and light truck production.

https://www.nytimes.com/2024/04/23/business/china-auto-facto... | https://archive.today/4jCiQ

https://electrek.co/2023/04/01/ice-car-values-plummet-in-chi...

China's current dependence on long petroleum supply chains from Russia and the Persian Gulf to fuel their current fleet of cars and trucks is a weakness, and Beijing is quite rationally responding to that weakness in national security by investing heavily in EVs.

To power all those EVs, China's adding coal-fired electrical generation capacity at a very rapid pace. (China has plenty of coal.)

Since 2018, and only if you don't think of OPEC as a single block (which in many ways they are). Also, being a top producer in the short term is just another example of short-term thinking. 80% of the world's oils reserves are in OPEC countries. Burning through a limited supply in record time is hardly something to be proud of.

80% excluding oil sands. Which is silly, because the oil sands are economically viable reserves, and would be even more so during a global crisis. The oil sands contain hundreds of years worth of oil supply at current rates.

Ok... What is the EROEI of these reserves?

Wouldn't even at peak levels (700mil) the total reserve be enough for just ~35 days or so? Of course that's still a lot but I'm not sure if 300 million barrels over a couple of years could affect prices that much.

Also it kind of made sense to sell when the price was so high and fill it up later.

If its 35 days at 700 mil, it's 15 at 300. 35 days doesn't seem like a lot but in case of emergencies, I'll take 35 over 15 any day. You need to give yourselves time to at least react to situations.

> You need to give yourselves time to at least react to situations

Our strategic reserves are for low-grade emergencies. For anything minor, the status quo will do. For anything major we’ll re-route civilian supplies. In between, the strategic reserve lets the military increase consumption without raising voters’ gas prices.

> for just ~35 days or so?

At full consumption. I'm pretty sure that in circumstances that would lead to the use of the reserverve, oil would be strongly rationed and directed towards hospitals/army/police/logicstics/etc.

Sure, but US has almost doubled its production since the early 2000s while consumption has actually slightly decreased. So I'd question the need to maintain a very large reserve anymore. IMHO these days using it as an "economic tool" to balance supply/demand would make a lot more.

A large surge in inflation seems like a decent time to use the stockpiles - it's not like they can't be replenished.

Especially given that the US is an exporter of energy.

Damn I hate it when it turns out a Republican talking point had some truth to it.

Reply on news.ycombinator.com