4-09-08 by dugan
Government boosts price of oil and gasoline! The actual big headline today is dual records for the price of oil (over $112 a barrel) and gasoline ($3.43 a gallon, up 22 cents in a month). The usual analysts noted a decline in U.S. crude oil supplies. And buried in a pile of federal energy statistics is this: The federal Strategic Petroleum Reserve grew last week to more than 700 million barrels, 3rd-highest in history. Not only is the government wasting taxpayer money on the most expensive oil ever, it is taking oil off the market and, in at least a minor way, raising the price of oil and gasoline.
The strategic reserve has grown by 4 million barrels just since the beginning of this year, and by 1.5 million barrels in a month. With prices like we have today, a normal response would be to sell enough oil from the reserve to drop the price. That wouldn’t please oil companies or hedge funds, the big beneficiaries of today’s prices, and it wouldn’t make refineries grow their gasoline production.
Such a sale would merely be a sign that government is finally getting serious about what oil is doing to the economy, and that there is actually a point at which it will act against speculators. Instead, it is signaling the reverse.