3-13 How India is losing its magic

http://www.economist.com/printedition/2012-03-24

Oil reserves

Don’t roll out the barrels

America’s strategic stockpile of oil should be held back for a genuine emergency

Discussion point:

Should government control the price of oil by resorting stocked oil or not?

The Economist suggestion:

Barak Obama should resist resorting oil from strategic stockpile, SPR. The strategic reserve should be kept for a real emergency, not squandered for reasons of political expediency.

*SPR = Strategic Petroleum Reserve that holds 700m barrels of oil in vast underground caverns strung along the Gulf of Mexico, set up in 1975 after a succession of oil crises.

Backgrounds:

Mr. Obama is plainly tempted to release oil from SPR

1. Soaring price of Brent crude and petrol that hits lives of people
2.  The approaching US election that bothers Mr. Obama
3. David Cameron’s support for the decision of Obama

However, the purpose of the SPR is to dampen the effects of catastrophic supply shocks, not to ease a president’s political difficulties.

1.  Gulf war, Hurricane Katrina, no such shock has happened this time.
2. Only 15% more expensive oil than at the start of the year.
3. Saudi Arabia’s promise to ensure that the world has adequate supplies.

Add to this, he should resist for two reasons:

1. He risks draining reserves while there is a threat that Iran may try to shut the Strait of Hormuz that is exactly the sort of emergency.
2.  The effort is likely to be ineffective, as the Libyan episode illustrates.