You know, I haven’t quite figured this out. I was emailing with a person from the American Petroleum Institute and she asked if I had seen the announcement of President Obama releasing 30 million barrels of crude from the Strategic Petroleum Reserve ("The IEA said it would release 2 million barrels a day (bpd) over 30 days onto the world market to fill the gap in supplies left by the disruption to Libya’s output.", the US is supplying 1/2 of the 60M bbls total)? I said yes, but that I’ve been scratching my head trying to figure out what the actual dodge could be – it certainly is not Libyan oil "disruption" (what the official reason was). Or is it being used as camouflage for some "other" action "over here" ("pay no attention to that man behind the curtains").
So, we have nations that have to import oil to meet their needs now selling oil to lower the overall price of oil – right! Prices have been dropping here in the US for the last month – this is supposed to make a difference? In the grand scheme of things, the 30 million bbls is a spit in the bucket – it will not make a difference AT ALL in the cost at the gas pump. While it did drop the cost of a bbl by $5, it also sent the stock market down – way to go in messaging the message, dudes!
The SPR contains about 730M bbls and is supposed to be used ONLY in extreme conditions – a national disaster either naturally made (think Katrina shutting down the Gulf, a war cutting off our supplies, or OPEN repeating the ’70s). While 30M bbls is only 4% of the reserve, is this the proper role of that resource?
No, it isn’t. We have no shortages,…
…there are no lines queuing up at gas stations, no one is screaming "we need oil!". Cars, buses, and trucks are all wheeling along, plastics are being created, petroleum based fertilizers are being spread – well, you get the idea. Life is normal – except for high prices.
No market driven reason at all. Yet, Obama finally shows, after shutting down the Gulf drilling, trying to stop fracking to exploit all that "new" oil and gas found in shale rock formations (gee, innovative technology taking what were diminishing resources and proving that we may have more than Saudi Arabia – no more paying money to oil dictators and terrorists), shutting down drilling in Alaska, and doing U-turns concerning drilling in the Atlantic and Pacific, that perhaps supply does matter in the real marketplace of quantity and price signals.
He knows full well that the price of gas at the pump IS a factor that voters will incorporate into who will get their votes. In essence, it is a proxy for the question of "Is he handling the economy right?". High prices means a "no", and Obama realizes it. Certainly, he knows that the PR after he gave a $2 Billion loan to Brazil to help Petrobas better drill for THEIR oil so that we would be their number 1 customer (hey, thanks for the slap at Canada and Mexico, Obama! Nice going at further alienating our allies and friends) didn’t help him, especially as he is denying us our own oil.
So there was actually there was a market reason – but not the energy one. Instead, think political – and a weak political ploy to boot. Let’s get real – Obama hasn’t been governing as much he has been doing exactly what he has always been doing: always campaigning for office. I just heard that at this time in his Presidency, Bush had attended three fund raisers while Obama has been at thirty. This oil release is nothing more than a political ploy:reelection.
The other question I ask is "Is this the last time that the SPR will be tapped"? I have used the phrase "Determined Weakness" – he shuts down further exploration which means that we will be able to do less in the future (as available energy determines the work that can be done which translates to wealth created). And if he continues to "drip, drip, drip" the SPR supply, would that not cripple us if a time comes when we really need it and it isn’t there?
Anyways, here’s what the API said about this – and they know FAR more about this than I do:
The release makes little sense for American markets. Crude and gasoline inventories are above average, and crude and gasoline prices have been trending down for weeks, despite the loss of Libyan oil, which markets have already adjusted to. The SPR was intended to be used for supply emergencies. There is no supply emergency. We don’t know what impacts this might have on markets long term. But we could and should be taking steps that would increase our own production by 2 million barrels a day or more for decades, which is possible if the government would grant much greater access to America’s ample oil and natural gas reserves. This would do vastly more to help consumers, increase energy security, create jobs and deliver more revenue to our government. It’s action that would truly strengthen our energy future, not a temporary gesture that has no lasting benefits.
30 million barrels is about what our nation consumes in a day-and-a-half. 60 million barrels (the total IEA release) is well under what the world consumes in a day.
Ploy? Certainly looks like it…
