Releasing Oil Reserves. Thoughts?

**Swift Sword** · 25 Jun 11,, 11:59

It has come to pass that there is a broad, coordinated effort by many governments to release oil from strategic reserves:

http://online.wsj.com/article/SB1000...0929000178.htm

My gut inclination is that President Obama likes the idea so it must be a bad one

but there are some of you that have a much better grasp of these kinds of issues than I and was interested in some more professional opinions.

As near as I can tell it is a multi faceted story that includes domestic politics in the U.S. and Europe, a Libyan angle, an Iranian angle, a Saudi angle to name a few.

Thoughts?

Oh, BTW, Light Sweet Crude futures pricing several years out: Light Sweet Crude Oil (WTI)

Thanks in advance for your input.

William

**kato** · 25 Jun 11,, 12:29

It seems to work - gas prices here in Germany have been dropping quite a bit since they started, we're back to a level we haven't had since before Libya.

Of course that's really just a temporary measure.

**Versus** · 25 Jun 11,, 12:49

Well, it is one of many short term measures evoked to mitigate the supply disruption. The projection was, that the Libya will go down in a matter of weeks, but now it appears that it will take a bit longer. So that has pushed the oil prices up a bit. Also it is the holiday season in Europe, people travel more, spend more and all that drives the demand higher. So with disrupted supplies and the increased demand there was a necessity to release some of the oil reserves to smooth things out. My projection (if anyone cares about it) is that you will see these interventions more and more in the near future. It is a natural order of events as we spiral toward first major disruptions in the years ahead.

**Swift Sword** · 26 Jun 11,, 16:19

Originally Posted by kato

It seems to work - gas prices here in Germany have been dropping quite a bit since they started, we're back to a level we haven't had since before Libya.

Of course that's really just a temporary measure.

Kato,

In this neighborhood, petrol prices at the pump were dropping sharply well before the announcement about releasing reserves (e.g. 15% in the fortnight leeading up to the announcement).

The market was already finding a new supply/demand equilibrium and Libya was priced in.

I don't think President Obama is superficial enough to take the political risk of intervening in the oil market just to drive retail prices down when they were already sliding (I could be wrong...and that may be the motive of other governments) but I am certain he is vain enough to take any and all credit for it.

William

S2 · 26 Jun 11,, 17:31

The larger questions are can this buy time to get a sustained recovery in place and can America develop and implement a bipartisan energy policy that reaches beyond a junkie-like fix.

I won't write for others but, on matters like these, where we go others often follow.

A comprehensive nat'l energy policy reached by bipartisan accord is long overdue.

**kato** · 26 Jun 11,, 18:43

Originally Posted by Swift Sword

In this neighborhood, petrol prices at the pump were dropping sharply well before the announcement about releasing reserves (e.g. 15% in the fortnight leeading up to the announcement).

Not around here. We had approached a rather stable price level of about 8.40 to 8.60 USD/Gallon for Super 95 RON /E10 which was held stable for over three months; Libya never figured much into it because any oil exported from Libya to Germany is done so by a single German company (Wintershall) - which keeps controlling its oilfields through bought local tribes despite that little tiff on the coast, even if it doesn't deliver to Germany at the moment.

Of course that whole price level thing is mostly about Shell and BP controlling the end-consumer market in this country and currently being under accusation again of artificially keeping prices high. They're reacting to that by using the reserves on the market to lower prices. I just filled up my tank with that stuff for 7.75 USD/gallon today. Won't get any cheaper.

**gunnut** · 27 Jun 11,, 20:00

Strategic oil reserve should be released only upon national emergencies. What is the national emergency here? Obama's low approval rating doesn't qualify.

My other question is if a lower oil price is good for the recovery, does that mean it's good for the economy? If so, then why did Steven Chu say he wants to see gasoline price here in the US rise to that of European levels of around $8 a gallon? Is that good or bad? What does that say about him?

**Wooglin** · 27 Jun 11,, 20:33

What I want to know is why they weren't adding to reserves when the price of crude dropped like a rock in 2009?

**Wooglin** · 27 Jun 11,, 20:35

Originally Posted by gunnut

My other question is if a lower oil price is good for the recovery, does that mean it's good for the economy? If so, then why did Steven Chu say he wants to see gasoline price here in the US rise to that of European levels of around $8 a gallon? Is that good or bad? What does that say about him?

It says he's a global warming alarmist that puts his own belief system above anything that is actually good or bad for the economy

**Parihaka** · 27 Jun 11,, 21:08

Originally Posted by gunnut

Strategic oil reserve should be released only upon national emergencies.

That is what it was for, wasn't it. Not any more apparently and a free pass from the press.

**gunnut** · 27 Jun 11,, 22:00

Originally Posted by Parihaka

That is what it was for, wasn't it. Not any more apparently and a free pass from the press.

The national emergency here is Obama's falling poll numbers. A religious figure can't afford his faithfuls to have any doubts in his infallibility. This, is the Obamanation!!!

**kato** · 28 Jun 11,, 00:17

Originally Posted by gunnut

If so, then why did Steven Chu say he wants to see gasoline price here in the US rise to that of European levels of around $8 a gallon?

If the US raised gasoline taxes to the same point as European countries it might actually be able to get out of its deficit. Permanently.

Current taxation per liter Super gasoline in Germany (assumed end price €1.44/liter):
- €0.0041 for maintaining strategic reserves
- €0.6544 energy tax (general budget)
- €0.2736 sales tax
=> total tax €0.9321 = 64.73%

For the USA that would be about 200 billion Dollar per year.

**Julie** · 28 Jun 11,, 00:23

Originally Posted by kato

If the US raised gasoline taxes to the same point as European countries it might actually be able to get out of its deficit. Permanently.

No it wouldn't because the Goverment would spend it, not pay nothing down. The Americans would storm the Capitol, riots would break out.....etc., etc. Believe me, that would NOT work here.

**kato** · 28 Jun 11,, 00:46

Hey, just do it like we did. Claim the taxes are for getting the oil, i.e. financing the military.

The German government did that with cigarettes - i'm now involuntarily paying 4 cents per cigarette i'm smoking towards anti-terrorist operations and "improving the security of the nation". Cuz, you know, the Taliban would burn our tobacco otherwise. Can't have that.

**gunnut** · 28 Jun 11,, 01:11

Originally Posted by kato

If the US raised gasoline taxes to the same point as European countries it might actually be able to get out of its deficit. Permanently.

Current taxation per liter Super gasoline in Germany (assumed end price €1.44/liter):
- €0.0041 for maintaining strategic reserves
- €0.6544 energy tax (general budget)
- €0.2736 sales tax
=> total tax €0.9321 = 64.73%

For the USA that would be about 200 billion Dollar per year.

I don't think you understand how our government works.

1. Raise taxes.
2. Spend projected income.
3. People alter behavior due to higher cost.
4. Deficit occurs due to rosy forecast doesn't mesh with reality.
5. Deeper hole.

This is why we are in debt in the first place. Let's not make it worse.