Blatant Self-Serving State Intervention Roils Markets

Today the Department of Energy (DOE) in conjunction with the International Energy Agency decided it was going to release 30 Million barrels of oil from the Strategic Petroleum Reserve (SPR) – 1 million Barrels a day for 30 days.  According to the Energy Information Administration (a sub body of the DOE), we use about 18.77 million barrels a day, so that represents just about 5% of daily usage for those 30 days.   The SPR holds a maximum of 727 Million Barrels and is nearly fully stocked so the 30 million barrels to be released represents about 4% of the entire Strategic Petroleum Reserve.  This action comes after Crude has already come $20 off the $115 high, a feat the CME accomplished, almost certainly at the behest of the Fed and the Obama administration, by raising margin requirements dramatically.

The market reaction to this was for everything to sell off initially, with the Dow price-weighted index off well over 200 points, the S&P 500 off over 20, grains off 30-60 cents, crude down $5 and so on.

So lets review the latest action through the “government intervention” prism.  According to the DOE web site:

Established in the aftermath of the 1973-74 oil embargo, the SPR provides the President with a powerful response option should a disruption in commercial oil supplies threaten the U.S. economy. It also allows the United States to meet part of its International Energy Agency obligation to maintain emergency oil stocks, and it provides a national defense fuel reserve.

According to the press coverage surrounding the release, this is only the 3rd time a release has been authorized.  Ok.  So there must be an imminent threat to our oil supply?  Hmm, Libya?   No.  There are enemy soldiers on our shores waiting to attack the United States?  Hmm, no.  And in any event, you wouldnt release the emergency reserve to the public if that were the case, you would save it to fuel tanks and planes.  Oh yeah, that is why we have the Strategic Reserve, to use in real emergencies.  So what is the real emergency today?  With none visible on the horizon, my guess is that the emergency is the plunge in approval ratings for “President” Obama and Fed Chairman Bernanke in the face of irrefutable evidence of the vacuity and failure of their neo-Keynesian-can’t-let-anyone-get-in-trouble-don’t-worry-mom’s-coming-round-to-put-it-back-the-way-it-oughtta-be economic worldview.  And like the underlying refrain in the Tool song from which I took the second half of that run-on description, you had better learn to swim.  What this decision represents is a massive abuse of the President’s authority in order to serve his personal interests in re-election.  The Statists are in control and the longer they are, the more likely we will all fall off the cliff into a sea of prolonged thick stagnant sclerotic economic tar.

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