April 17, 2024

Select Page
Home » Chart of the Day » U.S. Kicked the Oil Can Down the Road to Lower Gas Prices

Posted by | Sep 19, 2022 | ,
2 minute, 30 second read
Supply and demand determine prices.
This has been true for thousands of years.
Yet politicians seem to believe they can repeal the laws of supply and demand.
The latest example is in the oil market.
I touched on this last week when discussing supply chain disruptions.
Global governments decided to release oil from strategic reserves to ease price pressures.
Strategic reserves should provide oil when global emergencies interrupt supply.
Governments created them after oil embargoes in the 1970s led to deep recessions.
The U.S. holds up to 714 million barrels of oil in its Strategic Petroleum Reserve.
When prices rose after Russia invaded Ukraine, the U.S. announced plans to sell 180 million barrels over six months.
That’s an average of 1 million barrels a day, about 5% of the amount used in a typical day.
Other nations agreed to release another 60 million barrels to meet 0.33% of global daily demand.
Strategic reserves are down by about a third since the beginning of the war.
Source: U.S. Energy Information Administration.
This has a minimal impact on energy prices.
Treasury Department economists estimate it lowered the price of gas as much as $0.42 per gallon.
That amounts to about one-third of the drop in prices since the June peak.
While any price reduction is welcome, the Treasury estimate uses some generous assumptions.
The impact of the reserve releases might have been closer to $0.10 a gallon.
Taxpayers will have to pay that back in the long run.
They may pay back much more than that.
The oil came from strategic reserves.
It’s in the nation’s best interest to hold those reserves and replenish them.
That will require buying more oil.
The oil that was sold carried an average cost of less than $30 a barrel.
Replenishment prices will be at least 100% higher.
Plus, the government doesn’t have the money to buy oil.
This requires debt.
Taxpayers will pay interest on the debt.
Bottom line: Lower gas prices are nice.
But the costs of this program are high.
P.S. You need to click here to check out my proprietary “Black Ops” investing strategy. I approached this system with the same military-grade precision that I used while I was a lieutenant colonel in the U.S. Air Force.
This is the approach I used when I managed over $220 million, and I’m ready to share it with you.
For around $4 per month, I’ll help you target up to 3X better returns than stocks with 4X less risk.
These are conservative investments, but I’m not talking about boring savings accounts or money-sucking mutual funds.
Click here to see how you can get started with “Black Ops” investing today.
Michael Carr is the editor of True Options Masters, One Trade, Precision Profits and Market Leaders. He teaches technical analysis and quantitative technical analysis at the New York Institute of Finance. Follow him on Twitter @MichaelCarrGuru.
Join True Options Masters.
Don’t get overwhelmed by the daily ups and downs of the stock market. Sign up for FREE access to our Money and Markets daily emails and take control of the markets!
Our experts do the work to make investing safe and profitable for you. Sign up for FREE access to our Money & Markets daily emails and take control of the Markets!
Money & Markets is America’s premier source for financial news, commentary and actionable research advice. Every day, Money & Markets gives you the information you need to protect your nest egg, grow your wealth, and safeguard your financial wellbeing. Learn more.
Our experts do the work to make investing safe and profitable for you. Sign up for FREE access to our Money & Markets daily emails and take control of the Markets!
P.O. Box 8378
Delray Beach, FL 33482

US: 800–684-8471
Int: +443-353-4188

Copyright © 2022 Money & Markets, LLC. All rights reserved.
Enter your username and password below


About Author

Leave a Reply