Oil and Politics

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US Grant
Joined: 04/14/2011 - 6:59pm
Oil and Politics

I got permission to post this from the author:

The dramatic and surprise coordinated announcement of the release of some 60 million barrels of oil from reserves in the US and Europe dropped oil prices some $4 yesterday to around $91 per barrel.

This decision was the most political decision made since Roosevelt arbitrarily set the price of gold every morning. There was, there is and there shall be nothing that warranted this decision, except falling poll numbers. Unless there is something truly terrible about to happen geopolitically that we are not aware of. Unless something truly bad does happen, this decision was at best misguided. Otherwise just idiotic.

Crude oil prices dropped in response, but that effect will prove to be a temporary situation. The reserve amounts to 726.6 million barrels (@$65 billion). Some 292 million barrels are 'sweet' crude and 434 are 'sour' crude (high sulfur). The storage for the SPR (Strategic Petroleum Reverse) is in salt domes in southern Texas and Louisiana.

According to the DOE the average price paid for the crude in question was $29.76/barrel. There will be a 'windfall' profit that the government gets when it sells the crude. The DOE says that crude can be withdrawn from the SPR is 4.4 million bpd and it will take 13 days to reach the market.

The context for this decision is overtly political. This is an act of desperation. The presidents poll ratings are plunging. The number one concern for the American people is the lack of job growth and gasoline prices. European politicians are in the same situation and the coordinated release shows that. Though market participants and economists consider this to be a poor and overtly political decision. The 'public' will love it though.

One must wonder when they will try the same with gold, by selling some from the 8600 tonne hoard (of the 27,000 tonne global reserve) that the US holds.

The trend long term is toward higher oil prices. Without new drilling policies and new refining capacity, nothing will change that.

So, oil company stocks were and will be effected, short term, but their fundamentals and opportunities remain sound.

Our problem isn't the price of oil. It is the price of poor political policies.

In other news, weekly jobless claims are showing a spike and persistently above expectations, trend. This is not good. This indicator tends to show economic tops better than economic bottoms, but the trend is not 'shinny'. Bernanke, in his talk this week admitted two things, their efforts to pump start the economy hasn't worked as well as expected and that his view of the economy is 2% growth for the second half of the year, break even after inflation.

On commodity prices, it seems that the upward trend is stalled, and they are no longer in sync with each other. Noted commodity specialist, Dennis Gartman believes the trend is not broken, "But first it must steady itself, and secondly so too must we,...that only the pernicious political nature of the Obama Administration has wrought ill."

J Dwight
President & Chief Investment Officer
Dwight Investment Counsel
120 Orchard Dr.
Wilton, ME 04294

Mike Travers
Joined: 08/04/2002 - 12:01am
This is a test. It will be

This is a test. It will be observed to see what, if any, effect it has on the polls, how long it takes to peak, etc. it will then be repeated just before the election along with other tested "poll bumpers' for maximum effect.

Lance Harvell
Joined: 01/17/2010 - 6:26pm
I read the article and what I

I read the article and what I found troubling is that apparently the Suadis are no longer "swing" producers. What does that mean? Maybe the peak oil guys have a point.

Joined: 11/13/1999 - 1:01am
Considering how much the

Considering how much the price of gasoline had gone up, I was surprised the federal reimbursement rate had not been increased at the end of the first quarter. Looking at the timing of this, I wonder if it was done to lower the price enough to prevent the federal reimbursement rate from increasing at the end of the second quarter as part of B.O.'s continuing war on working people.

Joined: 04/20/2000 - 12:01am
The US imports about 15

The US imports about 15 million barrels a day to supplement its 25 million barrel a day habit. Sixty million barrels from the strategic reserve is only a drop in the bucket and is not responsible for any price drop. The Saudis are still the swing producer and their strategy continues to be in a position to impact the oil market with their ability to adjust production by nearly 10% of the total market. Their recent inability to reign in their OPEC partners to drop the price because it is impacting the world economy was met by their unilateral increase in supply. That is the real reason for the recent drop in oil prices. How do I know this? The present Minister of Petroleum and Minerals of Saudi Arabia was my boss during my final years as a general manager of Saudi Aramco and during my early years in Arabia he was my neighbor. I was just in Arabia 2 years ago and was appraised of their capability and also their strategy.

On a separate note, Saudi leaders are just as afraid of the likes of Al-Qauida as we are of thieves and fanatics in our own country that we cannot control. I can assure you from first hand experience that when they are caught their day in court is very short and justice is swift and permanent.

Joined: 05/08/2006 - 10:52am
That is what I said in

That is what I said in another thread. We have 727 million barrels of oil in the Strategic Oil Reserve and they are only releasing 30 million with another 30 million coming from other allied sources. Folks, 30 million gallons is just a drop in the bucket and why are we importing the other 30 million gallons when we have so much more to pull from. Our Strategic Oil Reserve is at a record all time high. This makes no sense to me. I could see taking 1/3 maybe even a 1/2 and letting it build back up again. If we did it once, we can do it again.

Joined: 01/21/2008 - 6:21pm
A commodities investor in

A commodities investor in 2011 crying foul about the government's manipulating the market for a short-term gain . . . that's rich.

Joined: 02/13/2009 - 12:16pm
So 60 million barrels on the

So 60 million barrels on the open market, how much will we get for selling our 1/2? And how much to replace it? But it does show that drill baby drill will work.

Joined: 05/11/2004 - 12:01am
If he was serious about

If he was serious about dropping the price of oil he would once again lift the Executive Off-shore Oil drilling ban and then try to convince the market he means it. When George W. did this oil had its second largest one day drop in the price per barrel and ended that last rise to $4.00 range at the pumps. It is a futures market and the market beleived Bush might put a large untapped reserve on the market in the furture and oil reacted.

US Grant
Joined: 04/14/2011 - 6:59pm
Headline should read: "OBAMA

Headline should read:


In the Strategic Petroleum Reverse.

Joined: 11/13/2003 - 1:01am
He wanted $10/gal gasoline,

He wanted $10/gal gasoline, we said no, he got to $4/gal and didn't like what he was seeing, another epic failure!

If releasing 30 million barrels is a success, imagine what would happen if we reversed his de facto deepwater drilling moratorium and opened up drilling in the ANWR?


US Grant
Joined: 04/14/2011 - 6:59pm
Well, It took less than a


It took less than a week to bring the price of West Texas Intermediate (WTI) back up to above $95.00.

Proving once agian the the Great O knows nothing about economics.

Butch Moore
Joined: 11/20/1999 - 1:01am
Joined: 03/16/2008 - 9:59pm
It took less than a week to

It took less than a week to bring the price of West Texas Intermediate (WTI) back up to above $95.00. Proving once again the the Great O knows nothing about economics

Well, he knows something now. His advisors were undoubtedly divided into 2 camps- the supply/demand camp and the speculators-are-using-Ben's-phony-money-to-run-up-asset-prices conspiracy camp.

So they waited for a soft patch in oil prices after Ben had shut the spigots off, used the Libya excuse as cover (about 2 months late, and after the Saudis claimed they had already solved the problem:-), and made the release. I thought it showed clear tactical skill, as governance goes.

This is strong evidence in favor of the supply/demand camp. James Howard Kunstler predicted in 2005 that oil was about to skyrocket and the financial system was about to unravel, and that every economic expansion from here on out would bump up against oil prices, which would cool the expansion, which would lead to economic contraction, which would lower the price of oil, which would lead to economic expansion, which would lead to higher oil prices, which would lead to economic contraction.... I am dizzy just typing this.

If this is true, Peak Oil has occurred, and we are, so to speak, on a trans-Atlantic flight sucking fumes somewhere near the Azores. Thank God for wood heat...

Here is Kunstler in 2005:
Next week I'll publish my predictions for 2006. I think we were extremely lucky to get through 2005 without a debacle in the economy, and the financial sector in particular. But the imbalances out there are greater than anything the world has ever seen before and they are working their way through the system slowly like a gigantic pig inside the proverbial python. If we are actually at the all-time oil production peak,...


Joined: 08/11/2005 - 12:01am
We don't know if we're at an

We don't know if we're at an all time oil production peak because the government will not let exploration and production of oil occur in this country.

charlie neville
Joined: 10/17/2005 - 6:31am
Were preserving something for

Were preserving something for for those who follow, to hedge the default which seem inevitable.


Mike G
Joined: 02/17/2000 - 1:01am
Charlie I don't think we will


I don't think we will ever know what is occuring with the manipulation, I'd say it is not for you or I's benefit. I know I'll fill up the 455 buick this weekend, and go for a ride.

Joined: 11/13/2003 - 1:01am
We have plenty of domestic

We have plenty of domestic hydrocarbons, it is China that will be the key player in determining when the globe hits peak production. Their demand for transportation fuel is rising at an alarming rate as our demand is actually decreasing.

Joined: 03/16/2008 - 9:59pm
Oil Back Above $96 Barclays

Oil Back Above $96

Barclays Capital raised its forecast for 2012 oil prices, boosting its Brent price estimate by $10 to $115 a barrel

"The increase in 2012 is based on a further narrowing of global spare capacity .... the overall geopolitical context of the market is likely to become increasingly uncertain as 2012 progresses," Barclays Capital said.... "The main sources of demand growth in 2012 are expected to be China, India, Saudi Arabia and Brazil."


The case for Peal Oil just keeps getting stronger......

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