In 1996, The Government Tapped The Strategic Petroleum Reserve For A Very Strange Reason

In a new note out today, Morgan Stanley’s Hussein Allidina discusses the possibility of an oil supply disruption and how it might be handled by the government, most notably through the tapping of the Strategic Petroleum Reserve.

Allidina has good news:

A closure of the Strait of Hormuz would necessitate a global SPR release. With the potential to release 14.4 mmb/d within 1-2 weeks, the IEA’s global SPR should be sufficient to offset what would likely be a short-lived disruption. Moreover, recent reports suggest the US and UK may be planning a pre-emptive release, which has helped cap the recent rise in crude prices.

And while the idea of releasing any SPR is mocked, history does show that such moves depress the price of oil at least temporarily.

This chart of the history is particularly interesting.

Click to enlarge


Photo: Morgan Stanley

Weird. There was actually a time when the government was so concerned about a balanced budget that we ostensibly sold oil to raise money.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.

Tagged In

moneygame-us oil