Saturday, June 25, 2011

Slight of Hand: Energy Style

The President announced that he'll release 30 million barrels of oil from the strategic reserve.

Why?  If you ask the administration, then it's in response to the "crisis" in Libya (have you started to get the feeling that we are the ones causing the crisis?) and reductions in production worldwide.

Hmmm..30 million barrels. Sounds like a lot, but let's add a little perspective.  We use 20 million barrels of oil a day for our gasoline production.  Wow, a day and a half worth of oil!  Awesome!  Not really.

So how big of an effect will this "release" cause?  Not much.  What would be more beneficial is if we lifted regulations on the oil industry for exploration and issue new permits.  Politically, though, that will not happen in this administration.  Even though those who protest new exploration of oil drive to their protests in oil consuming vehicles, warm their house with oil consuming machines, and turn on lights with electricity produced by oil/coal consuming power plants, we just can't look for more oil.  For the children, you know.

So, what's the real reason?  Poll numbers.  The President's poll numbers are sliding, and the "image" of the release of our strategic reserve is somehow supposed to help his numbers on this issue.  Of course, only help with those people who think that a 30 million barrel release would actually do anything for gasoline prices.

With politics, it's all about image.  Too bad, because the government could help with supply issues by easing regulations.  Oil prices are a simple supply and demand issue.  Demand goes high, supply adjusts...and so does the price.  Increase the supply, and the price will fall.  This release of oil is a slight of hand--it does nothing for long-term oil production for the world market. 

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