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before the international announcement came that the u.s. and others we're going to release 60 million barrels from oil reserves, crude was trading at $94 a barrel. the next day, crude prices dropped to $89 a barrel. now, a week later, crude is trading at $95 a barrel.


Oil prices have surged in the last few days and are now less than a dollar from where they were when President Obama made the controversial decision to tap the nation's strategic reserve last Thursday.

On Thursday, West Texas Intermediate crude edged lower to $94.27 a barrel. But that's still nearly $5 higher than last week, when prices fell over 4% following the oil release announcement.

Oil's stubborn refusal to trend lower since the United States and other industrialized nations announced they would flood the oil market with 60 million barrels of fuel over the next 30 days is raising questions over what's driving the market?

The more conventional theory is that oil's rise is related to the fundamentals -- or, at least, the falling dollar.

The dollar has fallen relative to the euro in the last two days as Greece looks less likely to default on its debt.

Oil, which is priced in dollars, generally rises as investors flock to the commodity when the euro strengthens and dollar's value falls.

"Oil is not up all that much more than the dollar is down," said Greg Priddy, a global energy analyst at the Eurasia group, a political risk consultancy.

Priddy said that if the oil reserves weren't tapped, oil prices would simply be higher. Rather than bouncing back to around their pre-SPR price, he said oil would be $4 or $5 dollars higher than that.

There's another view as to why oil prices are right back to where they were before the release. There's a sinking feeling that at some point the governments that released the oil will probably buy it back.

Paul Horsnell, head of commodities research at Barclays Capital, noted that prices for oil contracts several months out in advance have risen even more than the near month contracts.

"The release is primarily a way of borrowing oil from the future into the present because the strategic reserves will ultimately be replaced," Horsnell wrote in a research note Wednesday. "Overall, we see the IEA action as being well motivated, but a shot in the dark."

The Obama administration argued all along that the release was meant to alleviate a supply disruption from Libya, not lower prices.

From a political standpoint, the administration is still in the clear: Gas prices -- what people really care about -- are continuing to fall from the nearly $4 a gallon mark hit in early May.

Gas prices usually lag oil price movements. They are still reacting to oil's general downward trend from over $110 a barrel hit a few months ago.

But going into a holiday weekend, it must be cold comfort for the administration to see oil prices right about back where they were before the SPR move.


so just like the stimulus, just like QE1 and 2, this is another failed and costly blunder, with little to no positive impact.

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"Priddy said that if the oil reserves weren't tapped, oil prices would simply be higher."

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Originally Posted by Bryant Platt:
"Priddy said that if the oil reserves weren't tapped, oil prices would simply be higher."

so that's what you're going to hold on to? well guess what. now we get to buy all that oil back - at taxpayers' expense - WOO! seems you totally missed the point. dumping oil onto the market has an effect only as long as that oil is on the market. in short, if you want to lower the price of crude, allow more production. there is no one time fix.

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I know gas prices are out of whack, but prices rise and fall. Don't things like that happen in the market everyday?

It is summer which means people are using their A/C in their cars. It's amazing how much more gas your car burns when you blast that A/C the whole time you're driving. Mine went so fast I thought someone had siphoned my tank over night or something. So yeah people are more uptight about gas in the summer with A/C as well as increased travel.

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Originally Posted by Dødherre Mørktre:

Originally Posted by Bryant Platt:
"Priddy said that if the oil reserves weren't tapped, oil prices would simply be higher."

so that's what you're going to hold on to? well guess what. now we get to buy all that oil back - at taxpayers' expense - WOO! seems you totally missed the point. dumping oil onto the market has an effect only as long as that oil is on the market. in short, if you want to lower the price of crude, allow more production. there is no one time fix.

Well, it undermined the point you made in the OP that states this move had little to no positive impact.

As for your point, the petrol was sold into market (making the Federal government money) at desired price.  Also, the Fed does  not buy oil to replenish the strategic reserve, it accumulates it through royalty-in-kind transactions from companies pumping American oil (if we don't want the oil, then they pay us the value).  Both you and the article are both incorrect in suggesting that it will be bought back with taxpayer money, as thats not how the SPR works.

http://fossil.energy.gov/programs/reserves/spr/

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any way you want to slice it, it was a waste, and a failure.

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Originally Posted by Dødherre Mørktre:
any way you want to slice it, it was a waste, and a failure.

How so?  You gave two examples of how you though it was a waste (affect on price and tax payers buying it back), and I showed how both premises are false.  From what I see its doing what its supposed to do.  If you want to brand it a failure, you're ganna have to try harder.  

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Until speculators begin to feel that supply is greater than demand...prices will remain high.  War, middle eastern strife, the dwindling value of the dollar and the lack of drilling in America is hurting us.

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Originally Posted by Bryant Platt:

Originally Posted by Dødherre Mørktre:
any way you want to slice it, it was a waste, and a failure.

How so?  You gave two examples of how you though it was a waste (affect on price and tax payers buying it back), and I showed how both premises are false.  From what I see its doing what its supposed to do.  If you want to brand it a failure, you're ganna have to try harder.  

um....because it didn't get us anywhere.

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The goal was to suppress petrol prices.   According to the article it has done that.

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Originally Posted by Bryant Platt:
The goal was to suppress petrol prices.   According to the article it has done that.

sure, for a week. was the desired time frame a week? because a week later, and we're back to the same old market factors as before.