Saturday, June 25

Govt to sell oil from the Strategic Reserve

If you've been paying attention you know that the Obozo administration is about to release 30 million barrels of oil from our Strategic Petroleum Reserve, as part of a plan coordinated by the International Energy Agency.

Supposedly the other member nations of the IEA will release an additional 30 million barrels from their individual strategic reserves.

The releases--announced as 2 million barrels per day for a month--are designed to force the price of oil down. (It's been dropping even before the announced plan due to weak demand because virtually every major economy is having problems.)

Okay, so far it seems at least plausible. But consider: After just 30 days of sales, it will end--at which point world oil prices will seek a level unaffected by this artificial meddling in the market. Right?

And if increased supply normally reduces prices--which is the goal here--what would a rational person expect would happen when you reduced supply a month later? Yep, the price of oil should rise.

At that point folks in their 20's could be forgiven for thinking the whole exercise was a wash--a net zero. But consider that the SPR will be down by 30 million barrels, so to bring things back to where they were, the gubmint will have to buy that much oil again.

But wait...won't the price of oil be higher at that point, due to the loss of the amounts being sold from the SPR?

Hmmm. So barring some hidden ace, it would seem likely that the entire exercise will result in a net loss to the federal government, and otherwise will be a wash for consumers.

Now, this stuff is such basic econ-101 that I can't believe no one in D.C. realized it. So that suggests that there's another agenda here. You might think this sale could be a ploy to win votes to re-elect Barky, but because the election is 16 months off, that's probably too far in the future for voters to remember the drop in prices 15 months earlier.

So what could the reason be? Beats me--and who knows, it may turn out to have some unexpected beneficial effect. But right now it looks to me like it's gonna be a net loser.

What a shock.

Of course regardless of the outcome, we can expect the Lying Media to gush that this was exactly the right action, a perfectly conceived plan by the smartest preznit evah, and they'll say it had all sorts of wonderful effects.

MSM always has Barky's back.


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