The Release of Oil Reserves: Another Failed Obama Econ Plan

On August 23, just 9 days ago, trading for domestic crude oil opened up at $94.47 a barrel and was heading south when Obama and the Int'l Energy Agency (IEA) announced the release of 60 million barrels of oil from the Strategic Oil Reserves of 28 countries. Our share of that release was to be 30 of the 60 million barrels.

As of today, the price of oil sits at $94.95 and is now higher than it was before the announcement. Once again, this President and his frat-boy and sorority-girl advisers got it all wrong. They don't seem to understand markets or even simple economics. You "can not" use a "reserve" whose replenishment is mandated by law to drive down prices. Sure, there was a quick price drop for a couple of days but, that was because a few novice traders bailed to protect their profits. However, the smart money simply saw it as another buying opportunity for a commodity that could easily be in short supply if there were any supply disruptions in the Middle East or elsewhere or if the economies of the world perked up again.

The thing is, when releasing oil from the strategic reserves you, in theory, create a "supply" imbalance and, based on the Law of Supply and Demand, prices should go down; and, they did. But, what team Obama completely missed is the fact that, at the same time, you have created a future "demand" imbalance that will completely offset the advantage of that original "supply" imbalance. That's because the amount of oil that was released will have to be bought back to make the reserves whole again. What's worse, because prices are rising, the repurchase will be, more than likely, at a price higher than what the original reserves were sold at; meaning that, once again, Obama has just wasted more tax payers money in another failed economic plan.