It is officially called The
Strategic Petroleum Reserve. It was created after the oil
embargo of 1973. Currently, there is 695 million barrels of crude
(sweet and sour) in storage, the largest reserve in the world. At
current usage levels, this equates to 33 days of supply if used solely as
our fuel source. Of course, that is not how the storage would be
expended.
If we used the supply to augment current purchases in an effort
to stabilize prices, the Reserve could last as long as six
months.
Problem:
such is a temporary fix, of course. Oil purchased into the
reserve was priced at under $60 per barrel. Obviously,
replacement costs, something that investors will be considering,
could be double that price.
Secondly, no
one knows the full effect of releasing this fuel into the market place.
To this Okie editor, it seems like we are selling
house furniture to pay the mortgage. What happens when we
run out of furniture? Unlike 1973, we actually have plenty of
fuel supply. The price of oil is determined, in part, on the futures
market. Investors have much to do with current pricing as other influences . . . . . . .
and they are not all "American." If they think oil will sell at
a higher price six months from now, they will make purchases today,
setting in stone those prices, as a hedge against higher prices, "tomorrow." Understand that retirement funds are tied to investment strategies. It is how most who have 401K's increase the value of their investment.
A second influence that
is driving the price of crude, is the health of the dollar bill.
For the most part, all commodities, world wide, are traded with the
dollar bill and the United States controls the supply of the dollar bill.
If we print "extra" dollars in an effort to stabilize
domestic interest rates (which we are doing), that very process diminishes the value of the
dollar bill and, as a consequence, the price per barrel has to
increase -- in fact, the cost of all dollar-traded commodities
increase.
As I see it,
me being a layman analyst, this last consideration is that which
provides the greatest complication to our current problem.
Investor's are
betting on the Obama Administration and its mindless energy "policy."
Understand that while the Administration is bragging about how much fuel
is being produced - as if they were pro-oil - it fails to point to the fact
that oil production on Federal lands is down, and production on private
and state owned lands take more than 4 years to "permit."
Think about it, the production Obama is bragging about is the result of
permitting processes begun under the Bush Administration.
Can anyone say,
"Thank God for Bush?"
Point of post: as long as the United States trudges along without a comprehensive energy policy, we will have to deal with the whims of the marketplace. Free market capitalism demands that when investments are poorly structured, they be allowed to fail. The current national economic crisis is not the fault of the free market. Rather, the very opposite is true. Barack Obama and the Democrat leadership have all pronounced their displeasure with free-market capitalism, but, offer no viable alternative to capitalism except government sponsored bailouts, "investments," and the manipulation of the monetary supply.
Startling, isn't it? The current fuel crisis is not the cause of fuel, at all, but the idiocy of a presidency that is rogue, out of control, and bent on taking us away from those principles that made this country great. The following is the problem:
MICHELLE OBAMA: "Barack knows that we are going to have to make sacrifices; we are going to have to change our conversation; we're going to have to change our traditions, our history; we're going to have to move into a different place as a nation." (May of 2008)
Anytime Ron Paul sits across from Ben Bernanke you know sparks will fly. Sure enough, they did: starting 3 mins 50 seconds into the clip below, Ron Paul, guns blazing, asks the Chairman if he does his own shopping, if he is aware of what true inflation is, and if he knows that Americans don't trust the government because they are being lied to about inflation. And it only gets better, once Paul starts brandishing a silver coin. The punchline: "The Fed will self-destruct anyway when the money is gone" - amen. And ironically letting the Fed keep on doing what it is doing will achieve that in the fastest possible way. In fact, letting the system cannibalize itself with no further hindrances may be the best option currently available - just go to town.
