Minutes after reports of another Houthi missile strike on a Saudi Aramco facility sent oil prices to the highs of the session (while slamming the Nasdaq to a new daily low), a headline hit the tape trumpeting the possibility of yet another SPR release by the Biden Administration, as President Biden grows increasingly desperate to convince the US that he’s ‘doing something’ to counteract inflation, and punishing prices at the gas pump.
#Biden Administration considering releasing more than 30M barrels from Strategic Petroleum Reserve
— Marco Ða Costa (@TraderMarcoCost) March 25, 2022
Of course, just like last year’s SPR release, which actually sent oil prices higher as the strategy backfired spectacularly, another shot of supplies from the reserve would probably be futile.
To further illustrate this point, the chart below shows that a release of 30M barrels from the reserve (which is supposed to be reserved for emergencies) would be tantamount to a drop in the bucket, quickly dissolving like spit on a hot griddle.
In fact, this time around, it’s possible – even likely – that the backlash could be even more punishing, since, when adjusted for the present level of implied demand, SPR levels are already at their lowest levels since 2002, with just 33 days of supply.
But like the old saying goes: if at first you don’t succeed, then try, try again. In all likelihood, President Biden and his team probably aren’t all that concerned with the short-term market impact, since political decisions like these are all about optics anyway.
Of course, Einstein seems to have been right: “insanity is doing the same thing over and over again and expecting different results.”
And when another SPR release fails to do much of anything to drive prices lower, how much longer until the administration resorts to the next logical steps, being 1) gas stimmies (like our European allies) before 2) price controls?