QUESTION: Marty, looking at Socrates, it does not show that this release of 400 million barrels of oil will do much. Am I reading this correctly?
ANSWER: The International Energy Agency released 400 million barrels of oil into the global market, the largest release of emergency oil stocks in history. This is just for show. However, it actually makes things far more vulnerable. This is all predicated on a quick victory with the conquest of Iran. If that assumption is wrong, this will not help.
1. MATHEMATICALLY INSUFFICIENT (won’t even cover 2-3 months of lost supply)
2. STRATEGICALLY STUPID (leaves U.S. vulnerable to future crises)
3. POLITICALLY DESPERATE (election-year panic move)
4. ECONOMICALLY FUTILE (treats symptom, not disease)
Let’s get real. Global oil consumption is about 100 million barrels/day (mb/d). U.S. consumption is about 20 million barrels/day. The disruption of the Strait of Hormuz supply affects about 21 million barrels/day (21% of global supply). Releasing 400 million barrels at the global consumption rate would last 19 days (400M ÷ 21M/day). There is no way this will calm markets in the long term.
Hellbound and Down 