Uncommon Wisdom: Obama's Desperate Move Could Send Oil Prices Soaring

The sudden announcement last week that the International Energy Agency (IEA) would release strategic oil supplies onto the world markets caused a significant selloff, and crude oil prices dropped around $9 in two days. The 60 million barrel release from the Strategic Petroleum Reserve (SPR), is merely a drop in the bucket of global usage, and will likely have the opposite effect on prices long term. The government move is simply more psychological window dressing for the comic theater that is happening in Washington right now. It would be funny, if it weren't so sad: In fact, it is really a sign of "desperate measures". By releasing supplies from the SPR with crude at around $90, if prices go up again, the administration will have to fill the SPR back up at a higher price. A big chunk of that oil will come from outside our borders: It's another foolish rob-Peter-to-pay-Paul action by the imploding US government. The careless action taken by the IEA and President Obama has now underscored how worried "they" actually are about the global economic growth and tight supplies, so in essence this move could actually stoke the fire to drive prices much higher, much more quickly. In a recent Bloomberg report, Caroline Bain, of the Economist Intelligence Unit was quoted as saying: "Although the immediate impact of the IEA's reserve release will be to depress prices, in the more medium term, it could actually be bullish for prices. Reserves are finite and cannot be released forever." Unlike Uncle Ben's printing press that never seems to run out of ink, oil supplies are not something the US government can simply print more of!