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Strategic Petroleum Reserves: The New Monetary Tool?
By EconMatters
Oil and commodities are rising with renewed talk of buying bonds in Europe and future stimulus from the Federal Reserve in the United States. The problem of course is that higher oil prices partially offsets some of the benefits of these Monetary Initiatives by leaders (It is debatable how effective these policies actually are in solving the real issues and problems).
One of Europe`s biggest problems is lack of actual growth in the Euro zone, and this means that they really cannot grow their way out of their vast debt troubles. It sure cannot help that much of Europe is paying $12 a gallon for gas. No wonder their economies are in trouble.
The way European economies are set up with regard to slow growth, mature countries with little innovation, high taxes, and even higher government spending commitments means the numbers just don`t add up. Europe could start from scratch with all debt forgiven and they would be right back where they are now in less than 10 years because the numbers just don`t add up. Until the numbers start to make sense all these monetary initiatives are just temporary stop gaps which actually make the numbers problem worse.
But since everything seems to be managed these days, and all markets are correlated globally with electronic trading and sophisticated trading algos, central governments might as well be in charge of the actual commodities they are juicing. Because in effect their policies are managing these commodities prices, from corn to gold, from gasoline futures to silver prices as it is all the same trade in the market`s perspective.
So why not let these central governments manage the outright commodities just like OPEC? ECB starts bond buying program, dumps a bunch of oil on the market to offset the negative side effects of their programs. The Fed starts QE3, dumps a bunch of Oil on the market at the same time so Oil prices don`t rise with the stock market on QE3.
Do these SPR releases work? Heck yeah, just ask all those traders who lost money last year when WTI went from $115 a barrel to $94 in 24 hours on the rumor behind the scenes that the SPR releases were being coordinated (this is long before the actual news when the price dropped about $7 dollars a barrel).
By the time the SPR releases were actually announced all the big players had already priced this event into the markets. The real damage came before the actual announcement as like most things on Wall Street inside information runs rampant when so much money is involved.
Can you imagine how valuable that information was that was leaked to the big players that there was going to be a large coordinated release of the SPR`s? Now you are not naive enough to think that the magical $20 drop in Oil prices over that 2 day period was just natural markets at work do you? So yes, SPR releases do in fact work!
Oil markets like most commodities are momentum based, and besides the immediate additional supply on the market and the drop in futures prices as longs get screwed and have to dump positions is the psychological factor that at any time the Government can come in and “manage” the market. It is hard to get too much momentum going under those circumstances. In effect, sort of like OPEC manipulates….I mean “manages” prices.
Why not set a target and then trader`s will know exactly where they can push the price of oil before getting out? Is it any different than the Swiss targeting a level in their currency or China for that matter? If the ECB is going to target an interest rate for Spanish Bond Yields on the 10=Year why not set actual targets for Oil as well.
For example, target WTI at no higher than $90 or $95 a barrel and Brent at $105 to $110, and then Central Governments wouldn`t even actually have to release any Oil as they could just set the targets and markets would do the work for them assuming no actual supply shortages in the market. Which by the way has actually been the case for the last 5 years based upon conservative analysis of the EIA data, i.e., there has been no supply shortages despite the price fluctuations with all oil inventories well above average supply levels during this period.
Really, since Finance ministers are in effect “Managing “ oil prices as a byproduct of their actions anyway just give them one more tool for their policy initiatives in letting them manage the releases of the SPR`s as well.
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I realize it takes energy to produce hydrogen. But if your car is going down the road with fuel that costs $10 a gal, and you can afford it do you really care? Today in Europe thats the situation. Thats why selling the SPR never made more sense. How much would it cost to switch to hydrogen, hundreds of billions, maybe trillions, but the US spends that much in a year on the millitary whose primary purpose nowdays is to keep the oil flowing.
http://thinkingaboot.blogspot.ca/2011/06/eating-opecs-cake.html
Hydrogen? Really?
It is amazing how the average person can be completely fooled by the equivalent of Tinkerbell and her magic wand...
The biggest problem with Hyrdogen is storage and volatillity.
This guy has solved that problem with a hydride sponge type tank. Similar to the way Acetylene is stored in tanks.
http://www.switch2hydrogen.com/
He invents a brilliant and safe way to store H as fuel! - and does he get a Nobel Prize or something..no not exactly!
This happens!
http://www.wired.com/wired/archive/14.06/chemistry.html
If you have a solar system or hydro system providing the power to your electrolysis system and filling these tanks then why would you even care how efficient it is?
The unlimited amount of fuel sort of makes up for the efficency part of things.
The lack of pollution also helps!
I have seen unmodified gas engines run on hydrogen. The exhaust is just water vapour + a tiny amount of pollution from burnt crankcase oil.
I have even seen someone hold a glass over the exhaust and allow the water vapour to condense in the glass and then drink it.
Just for fun, lets also talk about efficency. This guy was also on to something regarding that.
http://www.youtube.com/watch?v=nOGAkRkCWfA
Here ya go...imagine a diode/capacitor Cockroft-Walton type voltage multiplier circuit. Some are pictured on this page.
http://www.rmcybernetics.com/science/high_voltage/voltage_mult.htm
Now imagine that each capacitor in each stage of the Voltage Multiplier is inside the electrolysis tank.
Now lets imagine that the water IS the dielectric between the plates of the capacitors.
Look at Stan Meyers video again..see the capacitors now? Each tube has another tube nested inside it..inner tube is one plate, outer tube is another plate.
Water is actually a very good dielectric. Distilled water is a great dielectric.
You get high voltage on the plates of each capacitor and it does not require a bunch of amps and something added to the water to make it conduct, like traditional electrolysis does.
Meyer also claimed that the frequency you feed the Voltage Multiplier had something to do with the price of rice.
I don't know but I do know that resonant frequencies can shake very strong bonds apart..but don't know if this works on a molecular level or not.
Vibration sure works on a large scale.
http://www.youtube.com/watch?v=3mclp9QmCGs
Also consider that Semi-conductor diodes did not exist when Faraday was writing his stuff.
There will NEVER be Any economic recovery when oil prices rise on even the smell of it. God help me if a "recovery" does start because I could not afford it. I am already driving 50% less because I will not pay rip off prices at the pump. Think about the affect that has on the business that count on my money. I know I am not the only one, ZH shows me I'm not.
YES you can print oil, but the US has the best system, with the official separation of public and private stocks. Enterprise counts publically owned stock in private storage against their inventory (much like banks receive more notional electronic collateral or reserves to support their balance sheets). AND like the SMR (Strategic Monetary Reserve) there is little or no possibility that oil will enter the system - it's just there for bargaining purposes - when the tankers arrive in NY city - enterprise storage can say, gee my tanks are full - and they are full - of government loaned oil...
this is why traders no longer pay attention to inventory - they pay attention to crack spreads.
the rest of the world is adding storage as well, but two things matter, one is that above ground storage adds cost to the product. and unless you have this porous membrane between private and public oil there is little chance to pull off the legerdemain. most countries have nationalized oil companies.
finally the goverment of the US is interested in keeping oil prices high, they represent assets (the best and biggest wall street dow jones companies) and if assets prices fall, they tend to fall as a class, including homes, stocks, gold, etc.
and the new leadership resulting from the arab spring movement wants higher prices, as they start selling oil to buy their way out of poverty. most of the global pressure on oil is to the downside, and the US wants to prevent that collapse. yes ducklings, Obama found one more way to sell you (the US worker consumer) down the river, but propping up oil prices, the jawboning you about hope and change. but Mitt Eastwood wouldn't be much different. Hi I'm a famous movie director, and I want jobs for you (and a great big tax cut for me)
but sometime somewhere oil and NG have to cross in terms of dollars per BTU, or the economic textbooks are wrong.
You don't actually believe what you just wrote, do you??
of course, oil reserves, (like monetary reserves) represents a giant shell game. that's the writers point i believe. monetary reserves can be created out of thin air, and phony, double counting of oil reserves, like phony Enron accounting of assets, done by UST as well, when counting checking accounts, which are swept into their asset column during off hours - used to create false inventory (oil and money reserves) - meant to push downt he price of oil and money. oil isn't created out of thin air, but inventory can be manipulated, as it was during the 2006 to 2008 runup to the election, using oil on loan out after Katrina. it was during the Bush admin and ever since, that the energy sec gained the authority to release oil without going to the president, (and the congress). people hate the congress because they HAVE NO POWER, THEY GAVE IT ALL AWAY AND THEY"RE STILL DOING IT...
the last release of oil from SPR resulted in a small rise in the price of oil, or we should say prevented a drop. the Bush people drove down the price of gasoline and what happened to the economy? (this is what they call a secular deflationary bear market)
While oil has indeed been financialized, the number of mutually inconsistent errors in your posts suggest that you don't really know what you are talking about... For starters, I think you have the dog and the tail mixed up....
Sorry....
You can't print oil, so that game doesn't work for too long given that SPR releases amount to just hours of demand. Short term psychological yes, but not unlimited like the printing press.
Did the author leave off the sarc tag.
If not. they had just best retire.
gotta keep those plump little soccer moms rollin' in their Denalis while the plump little debt-slave soccer dads slave toil for 60 hours a week at jobs they hate to keep the gas tank filled
How else would we get those "Milfs Gone Wild" websites going?
Great article, good job!
The days of "freely" traded oil are coming to a end....
Just another manifestation of Peak Oil...
The oil market is in fact considerably over-supplied when compared to actual consumption (as opposed to reserve building by the Chinese and others).
The problem is that the Brent/BFOE market which sets the price is functionally dead, and has been routinely manipulated by a couple of players on a scale that makes Hamanaka's ten year Sumitomo manipulation of the copper market look like a street market.
"do SPR releases work? heck yea" .. well this is by far the WORST zh post ever. e CON matters.. yea sure.
"Oil and commodities are rising with renewed talk of buying bonds in Europe and future stimulus from the Federal Reserve in the United States".
This my friends is the new world order! Chaos, lies, deception, fraud and money printing.
This is an 'American' world and a US world order...
'Americans': scamming the world since 1776, July, 4th...
Most 'Americans' are just trying to take care of their families and survive. Please define who and what is bothering you (or ripped you off, amount) etc. Who knows..maybe someone on ZH can address the problem for you.
Most Americans are f***king sheep who watch TV and Hollywood's crap that spews 24x7 propaganda for the elites and banksters pals. I bet you are one of them.
You probably love watching "college ball" and other inanities interspersed between the dumb white guy TV commercials, soft porn dramas, reality TV, constant priase for Mullah Obama and other crap. A nation of serfs who sold out their liberty for a clicker and HD.
the eye-opener is 51% of US families only have 3 months of savings in the bank
the eye-opener is 51% of US families only have 3 months of savings in the bank
you're being very generous. I would bet it is less than 0 weeks of savings when you deduct the credit card debt.
Ever wonder why the banks are stepping up the credit card giveaways at college (and my mailbox)? I see it as a covert "money printing" operating by the FED. An honest to goodness "helicopter drop" without negative effect to the currency. If you plaster low wage/income earners with credit cards they will in fact use it. That in turn drives the economy and gives us all the feel good numbers that drive the "market". Months/years later the FED magically "sweeps" the "toxic assets" from the banks books and VOILA!!
OH THE MAGIC OF FIAT!!! (Then those with low FICO scores can be re-cycled at a GM dealer).
If you consider the average homeowner and the debts owed by his local HOA, city, county and state governments..he is in really bad shape..because those governments all expect him to pay his share of those debts as taxes.
Furthermore, the more he pays them, the more they will be able to borrow against him and his property.
This guy was a banker before he became a Senator.
http://www.afn.org/~govern/mcfadden.html
1913-1933 the gold coin was encumbered and taken away..1933-1964 the silver coin..1965-now the land and the people are being used as collateral.
Read the book in my profile and read this opinion by Thomas Jefferson. It shows how property can be alienated and taken away from the true owners.
http://avalon.law.yale.edu/18th_century/bank-tj.asp