Crude Oil Release from Strategic Petroleum Reserve (SPR) Sticks It to Speculators

At last, a real effort to bring the oil speculators to heel.


Here is the background on the SPR and a story from US News on the release of 30 million galleons of petroleum to the commercial market from our current pool of 727 million gallons. Other countries also released another 30 Million gallons from their reserves.

The US release amounts to only 4.1% of our current government owned petroleum pool. What it portends has created a storm among the financial speculators and others profiting from high oil prices. This is finally an aggressive first step toward bringing stable and reasonably predictable prices to the petroleum market. It is great news for the preponderance of businesses for which petroleum products are important costs. It could be a God send for small businesses, manufacturers, the transportation sector, and the economy in general. All of these industries have been hurt badly by the volatility of petroleum prices. The release is bad news for the financial institutions that make hugh profits by speculation in petroleum prices. It reduces the influence of OPEC and is hated by the American Petroleum Institute. .

The puppet media, bought congressmen, and the financial speculators that gain by making the market volatile are screaming about government interferences with their game. Somehow it is fine for government bailed out members of the financial sector to buy and hold tankers filled with petroleum for a higher price but it is terrible for the government to do something to lower the price to the economy and the citizens.

This release was done by Presidential memo. If congressional approval was required it would not have had a chance against the special interest lobbying.

Operated carefully we can begin to get value from our 80 billion dollar investment that is now sitting idle in salt domes. If the price of petroleum would surge to a high price for reasons other than pure supply and demand a small amount of petroleum will be injected into the market to bring it down. That petroleum would be replaced in the reserve when the market returns to a lower price. The average amount in the reserve for emergency use would stay the same while the volatility of the market would be checked. There would be room for true business based hedging but no profit in wild speculation on price. This will remove a major financial risk to businesses. It is a good thing and if not derailed its’ effects will reverberate though the economy.

You can expect a major effort by the special interests to derail this. As I finish this post CNN is reporting on my TV on the decision to release the 30 million gallons. The newscaster claims that “the business community” complains that we should not release this small amount oil because it was “there for an emergency”. What a red herring! Who is this “business community?” Obviously a very select group of petroleum sellers and financial speculators. The newscaster did admit that other countries were also doing releases from their reserves.

You will be hearing lots of twisted logic from these self interests. Don’t believe them. They are not friends of the American citizens and definitely not trying to help with the recovery.