“Compared to Ford and Carter, the SPR experienced a ‘Reagan Revo­lution’ – although hardly of the free-market variety. Two reasons explained Reagan’s bullish SPR [buy and fill] policy. First, the reserve was the centerpiece of Reagan’s ‘free market’ energy policy, which precluded the need for stand­by price and allocation controls to deal with future emergencies. Second, the reserve was an instrument of foreign policy should U.S. intervention and confrontation lead to re­prisals by oil-exporting countries as it had in 1973 and 1979.”

“With the Reagan acceleration at a time of record crude prices, the reserve program became a major cost item, and with budget deficit problems, a group of pro­posals came forth to reduce cost while maintaining fill rates. Global settlements with refiners accused of product price overcharges was one tapped source.”…

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.…

“Regulation did not originate as a goodwill gesture from enlightened attorneys who wanted to spread their notions of the public interest…. It emerged in its current shape largely as a way to enforce Samuel Insull’s efforts to protect his empire from competition for the long term….”

Attorney and author Scott Hempling makes his living testifying before regulatory commissions, often on behalf of public interest and consumer groups. He is the author of “Certifying Regulatory Professionals:  Why Not?” recently posted on ElectricityPolicy.com, (Part I here; Part II here), from which I quote below.

Hempling’s argument is straightforward.  Today, policy and technology are always in flux, which changes the boundary between efficient and inefficient practices. People should know more. Things would surely be better if only regulation were driven by both facts and expertise, an “independent force that aligns interests of the regulated with the public interest.”…

“Export-Import loans have been particularly controversial because of prior expropriations of U.S. oil company property by beneficiary governments. Mexico’s nationalization of U.S. oil properties in 1938 was followed by a loan of $30 million for roads in 1941, a $10 million refinery loan in 1943, and a $150 million loan for general development in 1950. A 1946 loan of $5.5 million to Bolivia for production, refining, and pipeline expenditure followed nationalization a decade before.”

The Export-Import Bank (Ex-Im) was created by Executive Order 658l (February 2, 1934) to “facilitate exports and imports and the exchange of commodities between the United States and other nations or the agencies or nationals thereof.”  The bank could borrow, lend, guarantee debt, and “do a general banking business” with its $700 million budget. (See Appendix below for a description of the agency today.)…