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June 30, 2011

Flawed strategy on oil

Our Strategic Petroleum Reserve was to insulate us from disasters (such as an OPEC embargo or Saudi Arabia becoming Taliban controlled). For the benefit of a couple weeks of lower oil prices, we have converted the reserve from a strategic asset to a tactical one (6/24, A1, “Global reserve of oil tapped”).

We have no strategic or long-term goal in mind. My only surprise is that this did not occur shortly before the next election.

Paul Hirth
Olathe

Comments

whispering_to_kc

It's almost like all the Republican hopes for a brighter future for themselves always means dark things for the rest of us. Is it only me that sees that?

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http://www.washingtonpost.com/blogs/plum-line/post/dems-dig-in-gop-trying-to-sabotage-economy-on-purpose/2011/03/03/AGnrHetH_blog.html?wprss=plum-line

In recent weeks, there’s been some question as to how far Dems are willing to go in making the explosive charge that Republicans are deliberately trying to sabotage the economy in order to improve their chances of defeating President Obama in 2012.

On a conference call just now with reporters, Senator Chuck Schumer made the most aggressive case we’ve heard yet along these lines, leaving little doubt that Dems are locking in behind this message as the deficit talks hit crunch time and as the 2012 campaign looms.

“Do they simply want the economy to go down the drain to further their political gain?” Schumer asked. “They seem to be against anything that may create jobs, because they view a weak economy as key to their political chances in 2012.”

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No. I'm not the only one who's recognized that sad fact.

whispering_to_kc

I'll go out on a limb and predict that gasoline prices will fall to under $2/gal again by the end of the year, just like they did after the last big oil speculation boom in 2008.

The Barron's cover indicator is now also pointing at a price collapse for oil.

http://www.ritholtz.com/blog/2011/07/is-crude-oil-about-to-collapse/

Releasing worldwide SPR reserves was a nice way to give the price slide a little kick in the behind to speed the drop along weeks after prices had already peaked anyway.

No oil has yet been shipped from the SPR, by the way. They're only now starting the bid process for sales. The real SPR kick is yet to come.

It was a good move. The drained reserves can be replaced later at lower prices. This should all be good news and a win-win for everyone. Except of course the Republicans who obviously have much of their hopes for their future prosperity pinned on economic collapse for the rest of us.

Smarter Than You

Apparently Obama has read his polling and determined that his numbers constituted an “emergency situation” under d-2-b that allowed him to enact d-2-c. Just more of the fun and games from our transparent and accountable P.R.esident.

As for LIT, it’s remarkable that he’s crowing about the effect on price that a slight release of reserves had but would still argue that having a greater supply readily released from domestic sources would have little or no effect. Go figure.

whispering_to_kc

http://fossil.energy.gov/programs/reserves/spr/spr-epca.html

(d)(1) Drawdown and sale of petroleum products from the Strategic Petroleum Reserve may not be made unless the President has found drawdown and sale are required by a severe energy supply interruption or by obligations of the United States under the international energy program.

(2) For purposes of this section, in addition to the circumstances set forth in section 3 (8), a severe energy supply interruption shall be deemed to exist if the President determines that -

(A) an emergency situation exists and there is a significant reduction in supply which is of significant scope and duration;

(B) a severe increase in the price of petroleum products has resulted from such emergency situation; and

(C) such price increase is likely to cause a major adverse impact on the national economy."

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Seems pretty clear to me, that d-2-C part.

whispering_to_kc

http://fossil.energy.gov/programs/reserves/spr/spr-drawdown.html#nonemergency

The Strategic Petroleum Reserve exists, first and foremost, as an emergency response tool the President can use should the United States be confronted with an economically-threatening disruption in oil supplies.

In addition to national energy emergencies, crude oil has been withdrawn many times from the SPR sites for other reasons.

http://fossil.energy.gov/programs/reserves/spr/spr3304_history_of_releases.pdf

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Lower fuel prices are NOT what Republicans want to see coming this close to their chance to replace Obama with "President Newt Gingrich and Veep Michele Bachmann".

LawyerInTraining

Wow, an entire day and this "uber-Liberal"'s view wasn't challenged. Mark this one down in the history books, folks.

LawyerInTraining

Paul, the reserve was tapped in an attempt to drive speculators out of the market and give everyone a much needed break on overinflated gas prices. By choosing to release small amounts at unpredictable intervals those who are just in it to make a quick buck will think twice about bidding up the price.

Surprisingly enough, there ARE other ways to lower gas prices than just DRILL BABY DRILL.

 
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