The decision by President Obama for America’s strategic oil reserves, tap water is mixed reviews at home, but some foreign visitors should be on their feet applauding.
Central planners in Beijing must love the determination of the U.S. president, the price of imported oil, without them lower to a decline of its own strategic reserves Touch. Italian economic and political elite, cut off from their usual supply of light, sweet and oh so close to cut Libyan crude oil from civil conflict in that country, there are welcome to edges of the less-than-rock-solid economic prospects in their country.
Americans, on the other hand, the economic and political reasons, rather than strategic, that a sense of administrative rules. Energy prices could stimulate the strengthening of the portfolios of consumer confidence and helps spending, which drives more than two thirds of the U.S. economy. In the meantime, could gasoline prices and higher figures for economic growth and enhance the political prospects of the president as he heads into his re-election this year.
These are not the kind of justifications for the SPR after the oil embargo was created from 1973-1974. Stocks, which is related of 727 million barrels of oil and products in salt caverns in the mountains of Texas and Louisiana stored, “says the president with a powerful response option should threaten a supply disruption commercial oil production U.S. economy,” the Department of Energy website.
Initial response to the epidemic of 1991, the first Persian Gulf War, and again in 2005 when Hurricane Katrina struck in 25 percent of: Before last week, the reserve only twice used the domestic production of the country.
Obama has, in coordination with the International Energy Agency, a consortium that 28 developed countries including the United States acted, most of which are net oil importers in Europe and Asia. Eleven of these countries have committed to opening up their shares in addition to the United States, which provides half of the 60 million barrels of crude oil and products, the IEA plans, over a period of 30 days of release.
The administration and the IEA said in Libya as the source of “supply disruption” to justify the invasion of the emergency reserve. A press release by the IEA (1) found that the disruption “was for some time continued and its effect grew stronger as he continued,” and warned that “the normal increase in seasonal refiner demand expected this summer, the deficit is even more deteriorate. “
But in reality there is no deficit. During the trading hub for crude oil at Cushing, Oklahoma, shares reached their highest level since at least 2004 in April this year. Even now, many in the “continuous interference” of the supply chain, inventories of oil from Cushing 41 percent more than the five-year average for this time of year.
The civil war in Libya, the costs on the world oil market about 1.5 million barrels per day, according to the Department of Energy. (2) But Saudi Arabia has agreed to increase its own production to compensate for this loss, like many other oil-producing countries of the Arabian Peninsula. The oil prices, but still well above previous year falls more than a month before the declaration of the IEA, as well as the Libyan conflict led to an impasse and the high summer season approached in consumption.
And oil markets work very well together. Almost everywhere in the world anyone outside the conflict zones or in the worst managed economies of the world’s fuel, it is readily available on request. It only costs a lot compared to what some consumers (or the governments of the countries that subsidize their consumers) are used for payment.
Obama and the IEA will try a system of supply management, use the RPD and their equivalents in other countries as a mechanism for price management. It is unlikely to work, at least not for long, and one can attempt against a crisis, when a supply disruption occurs before the actual reserves are replenished.
The 60 million barrel version corresponds to a consumption of less than a day of global oil. Take advantage of the reserves are not a single drop of fresh fuel into the overall supply in the world. Any relaxation of short-term price will likely be balanced on the supply side in a short period, as lower prices increase consumption, which leaves just encourage everyone in the lurch with lower inventories will be – by this time, we reserve the right to reduce inventories.
If this version is followed by others, the cycle is repeated, each time leaving oil-dependent countries with small reserves to cushion a shock. This volatile oil prices, not less.
The statement undermines the efforts of Saudi Arabia for the loss of supply in Libya. Through the introduction of stored reserves in the market, like the Saudis were cutting other OPEC members and to stimulate their own production, Obama and the IEA have embarrassed the Saudi rulers and their encrypted financial calculations. Obama and the IEA should probably not count on help the next time they ask, Saudi kingdom, which has most of the world’s production capacity in reserve, to stimulate production.
The statement smacks of panic, not only in response to slower economic growth, but also in response to higher inflation. Rising energy prices and raw materials are rapidly leaks throughout the rate of inflation in many countries, including China, Brazil and the United States. The combination of rising inflation and slowing growth raises concerns about stagflation. The last U.S. president, whose government has in the stagflation was Jimmy Carter, and was defeated with drums and trumpets in his bid for a second term. Obama seems to be very well aware of this piece of economic and political history.
Thus, the release is unnecessary and the bottom line is bad news for oil producers and most of the countries that reject their reserves. But there is no cost for the Chinese. Not surprisingly, China’s National Energy Administration said it welcomes and supports the decision of the IEA.
I think our President can take comfort that at least someone thinks he is doing the right thing. Now he has published in U.S. oil use in China, he can try to find a way for China to find some of the electoral college votes in his favor in 2012 release.
Sources:
1) International Energy Agency, “IEA is 60 million barrels of oil on the market for the interruption of Libya to compensate”
2) BBC News, “the U.S. version of barrels of oil from the strategic reserve of 30m”
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