It is funny how talking points and “Buzz” words get thrown out and stick to the wall like my wife testing if the spaghetti is cooked.
Some of them that are unbearable is; Let’s circle back on that, These times are unprecedented, and now “We are going to sell Strategic Oil Reserves (SPR) to solve the worlds energy crisis”.
This morning Bloomberg posted the story “India to Sell Five Million Barrels of Strategic Oil Reserves”, which is only one day’s supply of the nation’s crude consumption. Let’s put that into perspective, a supertanker can carry 2m barrels of oil so that would be 2.5 tankers. Below are some interesting numbers from the IEA. Inda is expected to use 6.2m barrels of oil per day by 2025 and will grow to 9.1m barrels of oil per day by 2040.
Basic economics shows that when a commodity supply is lower the price goes higher, and conversely the increase in supply will drive the price down. Looking at percentages, the release of the SPR will impact the oil price at the refineries for a few days. Then basic economics indicate that the replacement of the reserves will have an inverse effect on the price of the countries oil prices.
With the King Operating research team’s numbers, we are going to see higher oil prices in 2022 and beyond. The inverse effect will be a much greater negative impact on oil prices than the short-term benefit.
So when the United States, China, India, and Japan all announced they are releasing the STR to help with oil prices, it is only a political stunt. This political stunt will actually backfire and play into Saudi Arabia and Russian plans for energy control.
So when you think your politicians are trying to help you out, read between the lines and prepare for more money coming out of your pocket to pay for gasoline and energy.