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View Full Version : Economics Oil Release price impact....done.


HonestChieffan
06-28-2011, 08:28 PM
http://www.zerohedge.com/article/strategic-petroleum-reserve-release-has-now-been-fully-priced-crude-gasoline-surge?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

BigMeatballDave
06-29-2011, 01:31 AM
I tend to believe it has more to do with the up coming holiday.

AndChiefs
06-29-2011, 07:34 AM
I tend to believe it has more to do with the up coming holiday.

No, silly. There's always only one factor affecting everything in this world. Gas's factor is that oil release.

oldandslow
06-29-2011, 07:53 AM
HCF - we disagree on many things...but not this. It was/is a silly political ploy in an attempt to give the masses a little sugar to get the medicine to go down.

Oil prices will go up and down, but the steady trend since 2000 has been up. I believe that to be due to supply constraints, but you may disagree.

Good article by Jeff Rubin about this whole mess...


http://www.theglobeandmail.com/report-on-business/commentary/jeff-rubins-smaller-world/why-is-the-iea-tapping-strategic-reserves/article2078462/

Why is the IEA tapping strategic reserves?

Jeff Rubin

Perhaps it is a vote of non–confidence in Saudi Arabia’s ability to ramp up production to its new 10 million barrel per day target. But who in the IEA really believes Saudi Arabia could sustain that level anyway? It hasn’t happened since the early 1970s. As I pointed out several weeks ago, the only country capable of producing oil at that rate is Russia, and it’s already doing it.

Still others will point to the use of the strategic reserves as nothing less than a macroeconomic stimulus measure akin to a tax cut, conveniently timed for an upcoming U.S. presidential campaign.

With the U.S. Federal Reserve Board’s quantitative easing and Washington’s fiscal stimulus winding down, will timely releases from strategic oil reserves become the new kid on the block in the Obama administration’s economic tool kit? But Washington may soon discover strategic oil reserves are a very dangerous instrument to use. It’s a lot easier to print money than it is to pump oil from the ground.

Other than the level of oil prices and the resulting weakness in oil consuming economies, what supply shock does the release redress?

There is no doubt the loss of Libyan production has made world oil markets even tighter but triple-digit world oil prices aren’t really about supply shocks. They’re about the growing imbalance between ever-surging world oil demand and little-growing world oil supply. And that imbalance is becoming bigger all the time.

While global inventories can still bridge the gap in the very near-term, they are hardly a sustainable solution. Even the U.S. Strategic Petroleum Reserve amounts to less than 40 days supply day for the U.S.’s 19 million barrel a day oil habit.

If inventories aren’t going to be depleted, tapping reserves today means restocking them tomorrow. When exactly does the IEA expect to take back into inventory to rebuild the 60 million barrels that they are now adding to the market? What’s going to change in the world demand-supply balance that will allow inventories be rebuilt without stoking the price pressures that tapping reserves are supposed to relieve.

The only plausible time for restocking to happen is during the onset of another oil -induced global recession, which, of course, the IEA may think will occur sooner than most of us yet suspect.

HonestChieffan
06-29-2011, 08:23 AM
This was pure politics. Nothing less, nothing more. Desperate move as he looks at the polls. Using our strategic reserves to pander for votes.

AndChiefs
06-29-2011, 08:32 AM
This was pure politics. Nothing less, nothing more. Desperate move as he looks at the polls. Using our strategic reserves to pander for votes.

Not as pandering as the Dem's rekindling the DREAM act legislation knowing that there's absolutely no way it will pass.

Hydrae
06-29-2011, 09:27 AM
This was pure politics. Nothing less, nothing more. Desperate move as he looks at the polls. Using our strategic reserves to pander for votes.

I understand the sentiment but I have my doubts that the IEA cares about his poll numbers. And if this is supposed to be a move to help in the election, they are about 10-12 months early.

RaiderH8r
06-29-2011, 10:47 AM
This is my take:

Obama Sacrifices National Security for Political Security

Congress enacted additional drawdown authority in 1990 (Energy Policy and Conservation Act Amendments of 1990, P.L. 101-383) after the Exxon Valdez oil spill, which interrupted the shipment of Alaskan oil, triggering spot shortages and price increases. The intention was to provide for an SPR drawdown under a less rigorous finding than that mandated by EPCA. This section, 42 U.S.C. § 6241(h), allows the President to use the SPR for a short period without having to declare the existence of a “severe energy supply interruption” or the need to meet obligations of the United States under the international energy program. As noted previously, the Energy Policy Act of 2005 made the SPR authorities permanent. These authorities also provide for U.S. participation in emergency-sharing activities of the International Energy Agency without risking violation of antitrust law and regulation.

Under the additional authorities authorized in P.L. 101-383, a drawdown may be initiated in the event of a circumstance that “constitutes, or is likely to become, a domestic or international energy supply shortage of significant scope or duration” and where “action taken ... would assist directly and significantly in preventing or reducing the adverse impact of such shortage.” This authority allows for a limited use of the SPR. No more than 30 million barrels may be sold over a maximum period of 60 days, and this limited authority may not be exercised at all if the level of the SPR is below 500 million barrels.

Number of days from SPR release to election 2012: 506
506/60= roughly 8 (8.367) SPR releases
SPR Releases: 30M x 8=240 M Barrels
SPR Storage: 720-240=480 M Barrels

The last SPR release would drop the reserve to just below the statutory line in the sand for a President to authorize these releases. So, when the question is, “Why not release the SPR reserves 4 months ago when Libya and Middle East unrest began? The answer is that by waiting the President assures him the opportunity to engage in SPR releases and subsequent poll bumps, through the 2012 general election.

This President is hell bent for leather on getting oil from anywhere in the world except new production or putting the GOM back to work. To top it off he continues to talk about repealing tax treatments on the energy industry that the entire American business economy receives. WTF is wrong with this guy's head? Oh yeah, it is shoved up his ass.

30M/60 days=500,000 barrels per day.

EIA estimate for GOM production taken offline due to Presidential Moratorium-440,000 bpd.

RaiderH8r
06-29-2011, 10:50 AM
We need a statute that says any time a President taps the SPR that permits currently in the system awaiting approval are streamlined towards approval and that NEPA and ESA considerations are downgraded to secondary or tertiary priorities under such a release because the premise of the SPR is that it is an emergency and if we so desperately need that energy then it makes absolute sense to accept the premise of the release and take aggressive policy positions towards new, American production.

Huffmeister
06-29-2011, 01:33 PM
We need a statute that says any time a President taps the SPR that permits currently in the system awaiting approval are streamlined towards approval and that NEPA and ESA considerations are downgraded to secondary or tertiary priorities under such a release because the premise of the SPR is that it is an emergency and if we so desperately need that energy then it makes absolute sense to accept the premise of the release and take aggressive policy positions towards new, American production.

I honestly don't know much about the oil situation, but that is one impressive run-on sentence.