The 'strategic political reserve' used for manipulating the market for oil

Loren Steffy, Houston Chronicle:

The Strategic Petroleum Reserve is apparently a strategic political reserve.
We now tap it not in times of crisis, but in times of desperation, hoping that we can quickly return to the collective denial of our oil dependency.

The massive salt domes that house U.S. crude reserves were supposed to be opened only in times of dire market disruptions. Instead, it's become a convenient response to rising gasoline prices.

"It's a knee-jerk reaction," said Michael Economides, an energy expert and professor at the University of Houston.

With the specter of $4 at the pump still hovering over the summer driving season, even though prices had dipped in recent weeks, the Obama administration on Thursday announced it would release 30 million barrels from the reserve, or about 1.5 million barrels a day through late July. The release was part of a coordinated international response to blunt rising prices after OPEC failed to do so earlier this month.

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News of the releases had an immediate effect on the crude market. Oil fell $4.39 a barrel Thursday, to $91.02, its lowest in four months. The decline came as oil prices already were falling because weak economic reports — including a rise in unemployment in the U.S. - raised fears that oil demand would decline.

The real goal of a coordinated release is more psychological, though. With OPEC failing to address the price situation at its stalemate meeting in Vienna a few weeks ago, consumer countries felt they had to act on their own to calm the market.

Europeans are particularly concerned about the loss of Libyan crude, for which their refineries are among the biggest buyers. The Obama administration, despite Chu's comments, is more concerned about pump prices. According to a recent poll, Americans fear higher gasoline prices more than rising unemployment.

Releasing crude reserves can put a short-term damper on prices, but it doesn't last.

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If they wanted a long term effect they would open up ANWR and all the coastal US waters. That would have an immediate effect on the market and it would be long lasting. The high price now has a lot to do with Obama's policy of strangling domestic production of energy where the US has control of the drilling permits. This current use of the strategic petroleum reserve is another example of a lack of seriousness when it comes to a long term energy policy and it is an attempt to glum on to the credit for already falling prices.