Sens. Kent Conrad, D-N.D., and Norm Coleman, R-Minn., were among the politicians Monday calling for the release of oil from the Strategic Petroleum Reserve to help reduce gas prices.
"It is important that we tap into part of our Strategic Petroleum Reserve as soon as possible to help offset the disruption to oil refiners and oil production on the Gulf Coast as Hurricane Katrina devastates the region," Coleman said in a release to media.
I'll leave it to the North Dakotans to criticize Conrad. Coleman's plan doesn't make any sense. The SPR holds crude oil. Any increase in gasoline prices as a result of Katrina will come as a result of speculation in the oil market and lack of refining capacity. The Gulf Coast has twice the refining capacity as any other region. If those refineries are shut down, all the crude oil in the world won't affect gas prices a penny.
Smilin' Norm doesn't know how long the Gulf Coast oil disruption is going to last or how severe the disruption will be. We will know much, much more in the coming days. It might turn out that a limited release of oil from the SPR might make sense, but Coleman is obviously more concerned with pretending to do something about gas prices than actually solving a problem.
Not to mention the fact that half of the SPR is located under the Gulf Coast of Louisiana and is unreachable at the moment. That's some good planning, there.
I'm modifying my thinking on this just a bit. Demonstrating a willingess to tap the SPR is a good idea, if only to calm the markets. Actually tapping the SPR won't do much good.
I love the way markets set futures prices. An act won't actually have any real effect on supply but the willingness of people in power to consider doing the act still results in lower prices.
It's a lot easier to get rich trading pork bellies than raising hogs. Especially if you can trick the Dukes into trying to corner the market.
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