BO tapped the Strategic Petroleum Reserve today aiming the bring down the oil price… But, why now, when the WTI/Nymex quote dropped to $95 yesterday already. Why didn’t he do it when oil was $105+ earlier this year? What’s the economic rationale here? What’s the strategic rationale? Your thoughts?
wants lower oil prices asap?
elections people… elections…
Since I spend a lot of time on this forum defending the position that government can have a useful role in the economy (other than “stepping out of the way”), let me just say that I don’t think this was a good idea. There really is no supply disruption to justify this. I do suspect that, with QE3 not on the table, and further stimulus a non-starter in Congress, this is one of the few things that the executive can do under their own authority to provide a stimulus, and perhaps this is what was motivating the move. I have been in favor of fiscal stimulus, but this one is not targetable to things like infrastructure or skills retraining, etc… Also, it is dobutful to me that it can be maintained long enough to have any long-term stimulative effect. Is this for elections? I think it is too early in the electoral cycle for it to have much effect. If it were Septembe-December, then it might have an effect in time to influence the elections.
QE3 is most certainly on the table. But, before they can create more money they have to drive down commodity prices, specifically oil. I’m with Bill Gross on this one. Stocks go down, panic goes up, QE3 “needed” but can only be implemented if inflation isn’t a concern. Do the math.
I think QE3 could get on the table again, but right now it isn’t. Talk of inflation from the Fed is a clear sign that they’re looking at that more seriously.
Someone tell this idiot that releasing 3 days worth of oil supply won’t stimulate anything… may be his pet beast might feel tingly but it means nothing to us middle class Americans…
oil prices fell 4.6% but are now starting to climb again because traders are betting that releasing some reserves now will hinder ability to lessen future shocks.
I should also point out that the stock market went down on this news, led by energy producers (though part of that was probably due to the dollar strengthening).
Watching WTI get crushed for one day. But the entire curve is still in contango. This will cause some of speculators to push back for a bit, but in 3months when the US/IEA has to buyback those reserves prices will go back up. The only thinking I could see is the IEA/US are so scared of China/India growth slowing along with the US/Europe has not even recovered yet. That they thought a temporary relief to those nations inflation costs makes sense. Either way the long term crude curve is simply showing prices are still going to rise. Releasing reserves when the US is producing the most it has in a while and more production coming on (Bakken and Niobara), not the smartest move by BO there.
With the curve in contango, does it make sense to own oil, then? Assuming that you have to pay someone for storage. I guess oil stocks is probably a better idea than straight-up oil, yes?
bchadwick Wrote: ------------------------------------------------------- > With the curve in contango, does it make sense to > own oil, then? Assuming that you have to pay > someone for storage. > > I guess oil stocks is probably a better idea than > straight-up oil, yes? A big reason that the curve is in contango is because it is implicitly counting the cost to store the oil. If it did not do that, you would have an arbitrage opportunity by buying the prompt month, paying to store it (either by paying to store it in somebody elses facility or by storing it in your own facility and forgoing the revenue you could receive by renting it to somebody else), and then selling the contract later. I’d use oil stocks to speculate on this simply because you need to have the stomach/pocketbook to deal with directly with futures (Potential for big $ swings). I also find that oil stocks less volatile than oil itself. Currently I do not have any positions in energy companies. With the recent run up in oil the prices just got too high.
ZeroBonus Wrote: ------------------------------------------------------- > Someone tell this idiot that releasing 3 days > worth of oil supply won’t stimulate anything… > may be his pet beast might feel tingly but it > means nothing to us middle class Americans… +1000
el duque Wrote: ------------------------------------------------------- > +1000 …I’m sure Bernanke is many things, but I don’t think an idiot is one of them.
^^ Bernanke?? I think zero bonus and el duque meant B.O.
AlphaSeeker Wrote: ------------------------------------------------------- > ^^ Bernanke?? I think zero bonus and el duque meant B.O. Yea, apparently, I’m the idiot, -1 for me. My mistake, sorry.
BO know releaseing 3 days of oil won’t do anything to the market (if he did, he is truly an idiot)…however, average clueless voters will think BO cares about the working American family, releasing the oil and troop draw-down are all in preparation for 2012 election.