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  • bluecheese4u bluecheese4u Sep 3, 2012 4:26 PM Flag

    Storm could turn on Obama if oil stocks are released

    Keeping prices down also helps to encourage wavering US allies to continue enforcing sanctions. But strategic stocks are a dangerous tool. There is no obvious supply disruption - losses from Iran are inflicted by the US itself, and in any case mainly compensated by other Opec members.

    The IEA considers the release during last year's Libyan revolution a success. But that crisis was short-lived.

    The situation now is different. Who knows how long the Iran crisis may drag on?

    Conversely, if the US anticipates war with Iran soon, strategic stocks should be held back, not squandered early. Its Strategic Petroleum Reserve (SPR) could replace total US imports only for about 100 days.

    The SPR was designed as an emergency buffer, not a tool for market management.

    If used routinely to reduce temporarily high prices, commercial storage will simply adjust and companies will hold lower inventory, rendering the SPR redundant. And, because the rules for emergency release are not clear, ad-hoc use exacerbates volatility in prices.

    The Republicans must be pleased with this outcome. They can attack Mr Obama over high petrol prices and weakening economic confidence. Simultaneously, they can bash him for being "soft" on Iran, when the very sanctions they have enthusiastically championed, and he has implemented, have caused these high prices.

    Robin Mills is the head of consulting at Manaar Energy, and the author of The Myth of the Oil Crisis and Capturing Carbon.

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