Obama Nails It: Calls For Release of 70 Million Barrels From The Strategic Petroleum Reserve

Finally we have some one on the national presidential stage willing to confront the staggeringly high oil prices at its core. Nothing would be more immediately effective than a willingness to release oil from the STP to rein in oil prices. It would immediately impact the psychology of the traders, having them begin a run for the exits. It would be a signal to oil producers, most especially OPEC that our days of being patsies to their cartel corruption are at an end. And it would have an immediate and salutary impact on the price of oil. Witness today simply mentioning the possibility broke the price of oil almost immediately by over $5 per barrel to under $120/bbl ending the day a shade under $4 barrel lower.

Of course the airways were immediately filled with talking heads and in-house commentators telling us that Obama's talk of a 70 million barrel release was not the cause of the price retreat. That it was all about Tropical Storm Edouard by passing the offshore production platforms (you could almost hear the sounds of "Damn it!" rising from the trading floors), and Iran's signaling a more accommodative response to the Security Council's threat of sanctions. Then there was the Aha! moment when one of the CNBC commentators instructed us that 70 million barrels was but a drop in the "barrel" given that we use 21 million barrels a day. Of course there was no sense nor appreciation nor insight into what the release of one or two million barrels a day would accomplish, released over a one or two month period. It would wreck havoc on oil trading futures and probably bring down the price of oil in short order by $20 or more in and of itself, and especially now that demand destruction is taking hold and the tendency is for the price of oil to erode in any case.

The release from the SPR would accelerate that decline dramatically. It would be a mirror image of what OPEC has done to us. As prices were escalating they withheld millions of barrels from the market pushing prices ever higher. Now that consumption is declining we would be putting more barrels into the market to make prices decline even faster.

All this would be perfect were we able to combine policy with an absolute ceiling on fossil fuel consumption for the nation as a whole, so that lower prices did not lead to higher consumption but rather simply to lower oil prices stopping the bleeding of our wealth to oil interests both here and abroad.