Obama is likely to tap the Strategic Petroleum Reserve in 2012, according to Barclays analysts Helima Croft and Amrita Sen.In their noted titled: High-wire act: Obama’s Iran and SPR policies, the pair walk through their thinking on geopolitics, Iran, and the Strategic Petroleum Reserve.
We summarize their bullet points:
- Obama is clearly trying to quiet the war talk, insisting that diplomacy and sanctions are still the way to go.
- Meanwhile, Iran has said it will resume negotiations over its nuclear program.
- Thus military confrontation probably won’t happen during the negotiations.
- That being said, the tensions will drive prices higher, putting more pressure on Obama to tap the SPR.
- In an outright confrontation, it would be a no brainer for the US and other countries to tap strategic reserves.
- But in a proxy war situation it gets trickier.
- Either way, SPR usage would only provide a modest benefit, given the tightness of the overall market.
Their bottom line:
The Obama administration is more likely than not to use the SPR, especially given that 2012 is an election year. However, if the release is purely politically motivated, it would do little to alleviate tight short-term market balances and simply make longer-term oil prices even more expensive.