Now that everyone agrees that oil is headed straight to $200, what could get in the way? A global economic collapse, for one (which won’t be too long in the making if oil really does go to $200). And perhaps a nice cold bucket of water in the face from Washington.
The Strategic Petroleum Reserve is the country’s emergency oil supply and is only meant to be used in truly dire circumstances. Congress and the White House are now mulling whether today fits that bill. It doesn’t, of course. But this might not stop Washington from trying to secure its own future by dipping into it (WSJ):
In Washington, deepening fears that oil prices will shoot still higher have stoked talk in Congress and within the Bush administration of using one of the last remaining cudgels to try to reverse the price rise: a sharp and sustained release of oil from the U.S. Strategic Petroleum Reserve.
Those discussions remain preliminary, though, while most senior administration officials remain opposed to such a move, because the oil stored in salt mines is meant for release in genuine supply emergencies…
Some advocates are clamoring for the Bush administration to take a more dramatic step and release millions of barrels from the U.S. strategic reserves, which contain around 706 million barrels. The House of Representatives is weighing legislation to force a release from the reserves, while support for such a move also appears to be building in the Senate
Releasing tens of millions of barrels obviously wouldn’t have a long-term impact on prices: we guzzle 21 million barrels a day. But it might burn some oil longs and make them less willing gamble on further prices increases.
Some pundits, of course, have resigned themselves to having no hope:
[S]ky-high prices have made refiners all the more reluctant to build up oil stocks.
“And even if you release 20 or 30 million barrels, people are still going to be worried about Iran or something else,” said Michael Lynch, a Massachusetts-based oil analyst who is among the many who believe that oil prices are already far too high.
Long-term problems require long-term solutions.
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