The Strategic Petroleum Reserve (SPR) was created in 1975 in response to the oil embargo of '73-'74. The purpose was to prevent the economic effects of future temporary disruptions of oil supply to the United States and provide a safety net until supplies were restored.
The SPR is located in the Gulf of Mexico region and is capable of holding 727 million barrels of crude oil. It reached its highest capacity in 2008 at 707 million barrels.
Thirty years ago designers could not envision how this responsible idea could be used to manipulate market prices for huge windfall profits.
In 2001, President Bush issued a directive to fill the SPR to 700 million barrels, a level reached in August of 2005. Hurricane Katrina caused some drawdowns on the reserve, but it was restored in April of 2008.
The Iraq war began in March of 2003 in response to the events of September 11, 2001. The United States government felt going after the person responsible for the 9/11 attack would not necessarily protect the national security of America and decided to attack Iraq because they felt it was supporting terrorism.
On the chart on the right, it is evident what the Bush administration decisions had on the price of oil. A small decline occurred following the announcement to fill the SPR to 700 million barrels, but then began increasing as the purchases started. After the war started prices began increasing more rapidly on the fear that oil supplies could be seriously disrupted, despite the fact that the United States imports only about 1 million barrels of the 21 million barrels it uses daily from the Middle East.
After the Department of Energy announced plans to purchase more oil for the SPR in March of 2007 prices spiked sharply. Even after reaching its goal of 700 million barrels, prices continued to rise. Then Katrina hit and prices accelerated its climb. By this time, speculation and euphoria takes over. With oil approaching $100, then breaking through with very little resistance, the price rose rapidly on every announcement of possible supply disruptions.
In January of 2007, President Bush suggested in his State of the Union speech that the Strategic Petroleum Reserve double in size. This was on the heels of the Energy Policy Act of 2005 that requires the SPR to fill to 1 billion barrels of oil.
At the time of the speech oil prices had been declining and were at the lowest point they would reach until October of 2008.
After reaching $100/barrel and with no sign of slowing down, House Speaker Pelosi called on Bush, in April of 2008, to suspend purchases of oil to the SPR and help to ease prices of energy to the consumer, a move Bush previously opposed.
On May 12, 2008 Representative Peter Welch (D,VT) and 63 co-sponsors introduced SPR fill Suspension and Consumer Protection Act.
The DOE announced on May 16, 2008 that it would halt all deliveries to the SPR by July of 2008.
On May 19th, President Bush signed the bill into law.
Ironically, the price of oil peaked in July of 2008.
Could it be that Bush orchestrated the biggest conspiracy of all time? Sending the price of oil into the stratosphere for the benefit of his buddies, Dick Cheney, his father and their Saudi friends the Bin Ladens?
The announcements to fill the SPR and the start of the Iraq war; was it a plan to increase oil prices from $20 to $147 and reap huge profits in the process?
It seems that Congress knew that ceasing the purchases of oil for the SPR would ease prices as demonstrated by their actions in May of '08.
Since purchases to the SPR have stopped, prices of crude have plummeted to under $50/barrel, a level no one ever expected to see again. You be the judge.