Strategic Petroleum Reserve Tapped
Today the US has announced it will release 30 million barrels of oil from the Strategic Petroleum Reserve (in Texas and Louisiana). This is beyond ridiculous to me, the Strategic Reserve is meant for emergencies not for headlines or political show. The amount of oil to be released is equal about one and a half days of US oil consumption and will not provide any significant relief of supply or price shock going forward. This announcement coincides with the International Energy Agency announcing it will release 60 million barrels of oil (2 million barrels per day) over the course of one month.
With half of the OPEC nations in the midst of revolution, this action may be too little, too soon. The real supply issues lie ahead, down a desert road, as long as it is uncertain.
why would we do this now??
ReplyDeleteThis has been done (referring to the 30 million barrels released by the US) as a form of fiscal stimulus, to drive the price of oil down. Unfortunately good intention often begets ignorant mistakes, especially in the world of politics. The market overreacted to the news almost immediately, as one would expect, and as stated the long term effect will be insignificant. Even by next week, unless further action is taken, this small move by the US and IEA may have worn out it's influence among traders and fundamentals come back into play regarding the potential supply problems from embattled nations.
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