Oil Plunges on Planned Release from Stockpiles

http://www.bloomberg.com/news/2011-06-2 ... libya.html

The U.S. and 27 allies will release emergency oil stockpiles through the International Energy Agency for only the third time in more than three decades as the war in Libya chokes global supplies.
The release of 60 million barrels, or 2 million barrels a day of oil within the first 30 days, will be coordinated by the IEA, the Paris-based agency said in a statement today. The move comes 15 days after the Organization of Petroleum Exporting Countries met in Vienna and kept production quotas unchanged as Saudi Arabia didn’t find enough support from other members to boost supply amid oil prices above $100 a barrel in London.

Yield is going down even more.

The people I pay attention think this is an act of desperation and portend much higher prices coming soon.

Imagine that - supply goes up and price comes down. Now what is the argument for choking domestic exploration and production again? That a million or so barrels of oil a day of production won't have an impact upon the price of oil on the open market? That it won't induce other oil producing nations to increase their output? I think we can see that both of these are untrue. When faced with the loss of sales the price will come down and the production will go up. A lesser amount of profit is a much preferred alternative to the loss of sales. Can't make any profit on a product that isn't being sold. Want it to go down to $40 or $50 a barrel and stay there? Start turning some of our trillions of cubic feet of natural gas into liquid fuel along with some of the coal. The government needs a reliable supply of fuel for military jets and tanks here at home, so lets sign a contract with someone willing to build such a plant knowing they have a market for the product. The plant could even be built on some of the mothballed military bases which already have contaminated soil out here in the west where we have an abundant supply of natural gas.

I am not understanding this move. Prices were already going down, in fact now, might be a better time to add to reserves.

Campaign push comes to mind. :thumbsup:

Yep, guaranteed to lose if gasoline prices don't drop significantly.

Yes PS- as you know I was involved in designing the first operational Fischer–Tropsch reactor in the USA- it is located in Commerce City CO. This process scaled up can produce synthetic gas and diesel at a price equivilant of about $46/barrel oil.

The process has already been approved for use in military aircraft and also works well in cars and trucks- it burns cleaner than gasoline or diesel. About 60% of the vehicles in South Africa have been using this stuff for 40 years and it is a proven technology. Look at a company called SASOL- you'll see what I'm talking about.

We have about 700 years worth of the raw material used to make this fuel here in colorado, utah, and wyoming. All that is required is the political will and the financial backing to do this here in America. Obama knows about this technology- but anything "petro" is a bad word these days.

As for why he picked this time to release these reserves- here is a good link that explains it pretty well- the crap is about to hit the fan regarding our economy and he knows it.....

http://finance.yahoo.com/blogs/daily-ticker/straight-jacket-time-dow-crude-tumble-obama-releases-163156859.html;_ylt=AhQpd.e8jdHeWjaADxpSEvAp2YdG;_ylu=X3oDMTBwcWVpbGxsBHBvcwMxMQRzZWMDTWVkaWFCbG9nSW5kZXg-;_ylg=X3oDMTFpMm9iMzh1BGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANibG9nBHB0A3NlY3Rpb25z;_ylv=3

SS109 wrote: I am not understanding this move. Prices were already going down, in fact now, might be a better time to add to reserves.

The prices were around $93/barrel compared to around $47/barrel the day he was sworn in and OPEC just announced that they wouldn't be adding supply anytime soon to lower the cost, which meant that a means had to be found to get them to lower the prices.

Add to the reserve when costs are low, now when they are high. If/when the cost drops to the level that it was when he was sworn in, then might be a good time to add to the reserves by having the companies pay their royalties in kind rather than in cash. When the cost of oil is high, it is then you then want to have the oil companies paying their royalties in cash rather than in kind. Of course, with the deficit spending of this administration consistently north of $1 Trillion a year, we may need them to pay their royalties in cash regardless, but that is a whole 'nother topic.

I wonder what Jefferson would have done with his oil reserves?

BearMtnHIB wrote: Yes PS- as you know I was involved in designing the first operational Fischer–Tropsch reactor in the USA- it is located in Commerce City CO. This process scaled up can produce synthetic gas and diesel at a price equivilant of about $46/barrel oil.

The process has already been approved for use in military aircraft and also works well in cars and trucks- it burns cleaner than gasoline or diesel. About 60% of the vehicles in South Africa have been using this stuff for 40 years and it is a proven technology. Look at a company called SASOL- you'll see what I'm talking about.

We have about 700 years worth of the raw material used to make this fuel here in colorado, utah, and wyoming. All that is required is the political will and the financial backing to do this here in America. Obama knows about this technology- but anything "petro" is a bad word these days.

In the interest of fairness Bear, it should be noted that the figure of $46/barrel equivalent doesn't include the capital costs associated with building the plant, it is simply the cost of operating the plant once it is built. Perhaps this would have been a good infrastructure investment of the SwindleUs funds, but as we know the purpose of the law was to swindle us into protecting government union employees at the expense of the rest of the nation when the economy turned sour, not actually inject money into the economy by investing in "shovel ready" infrastructure projects. Something was being shoveled all right, but it wasn't dirt being removed to address infrastructure.