On June 23, President Obama announced that his administration would release 30 million barrels of oil from the Strategic Petroleum Reserve in an effort to hold down gas prices. The move was widely ridiculed as a blatantly political effort to get past the Fourth of July holiday weekend; some liberals, however, hailed it as a success. The verdict is now in, as the effect of the release has run its course. This morning, an expert in the field emailed:
* The SPR’s release of 30 million barrels of oil was sold to oil refiners and traders at more than $10/bbl BELOW market. Can the US taxpayer afford the $300mm subsidy?
* Does the public know that prices are the same now, less than two weeks since the SPR announcement? Was this money well spent?
– WTI closed at $95.41/barrel on June 22 (the day before the SPR announcement), and is currently $96.15/barrel
– CME Gasoline closed at $2.97/gallon and is currently $2.97/gallon
* The likely outcome of cheap oil released in the US is cheap oil supplies to China’s SPR as oil that was needed in the US is diverted to other places around the globe. China continues to build their SPR.
* Since June 22, the dollar is weaker compared to a basket of currencies. So, any good that additional supplies to the market does has been offset by continued weakness in the dollar (as the market loses confidence that this government will do what it needs to do to bring our fiscal house in order).