A Shot Across the Bow…? (Oil, Oil Prices)

Is anybody else scratching their head about the
IEA’s plan to release 60 million barrels of oil? It’s odd. 60 million
barrels isn’t even a full day’s worth of supply. And it’s difficult to
argue that the world needs more supply right now.

By all reports, reserves have not been affected by supply disruptions in
Libya. And refiners will tell you they are awash in oil and, because of
high prices, have had difficulty passing on costs to the consumer in the
form of higher gas prices.

There is speculation that the Obama administration is playing politics,
attempting to drive gas prices lower and put more money in people’s
pockets. But it will clearly take more than 60 million barrels to do
so.

It’s also been suggested that the move is a shot across the oil speculators
bow, with the implicit threat that there’s more where that came from. But
again, I expect you’d need a lot more than 2 million barrels a day to
really rattle the market.

There may also be a hint of desperation in the IEAs decision. If we assume
that no other oil producer can raise production to ease prices, then
perhaps the IEA had no choice.

Personally, I choose option #2: that the IEA is trying to bring prices down
by