It was back in late June (June 23 to be precise) that President Obama announced that he planned to release 30 million barrels of oil from the Strategic Petroleum Reserve. According to some of the estimates I’ve read, that was about 5% of the total. The decision was driven because of the crisis in the Middle East and the slug-fest in Libya had decreased the global supply. At the time of the announcement price of oil per barrel was over $91. Accordingly, some welcomed the move as a positive step to keep gas prices acceptable. Others, however, said it was an ostensibly political move that would set a bad precedent.
As of July 15, the price of oil exceeded $97 a barrel. The positive offset that was imagined by tapping into our SPR never happened. And that may be a good thing. It will prevent future presidents from abusing another resource for political gain.
On Friday benchmark West Texas Intermediate crude for August delivery rose $1.55 to settle at $97.24 per barrel on the New York Mercantile Exchange. Brent crude gained $1.00 to settle at $117.26 per barrel on the ICE Futures exchange.
Barclays’ assessment adds to previous warnings by the International Energy Agency and the Energy Information Administration that world demand will outstrip supplies this year. Despite sluggish economic growth in the U.S. and Europe, experts say that oil demand from China and other emerging nations will drive global oil consumption for years to come.
The move reminded me when a Roman Caesar became unpopular or ran into a little trouble over one policy or another. He would increase the free rations of flour, whine, or bread. It usually kept the dissent at a low roar but it never fixed the problem. It only prolonged the inevitable.