Oil should be a dead issue. But the media won’t let it go and therefore I have nothing left to talk about. Weakonomics founding principle #3 states the government sets a bad example. Here’s an example:

The Boston Globe reported on a bill currently making the rounds through Congress. This bill essentially said, “Hey US Government, stop buying oil for the strategic reserve for a bit!” In more politically correct terms, the government should stop buying oil for the reserve until December or if the price falls below $75 for more than 90 days. If you don’t know what the US Strategic Petroleum Reserve is, you’re a disappointment.

For the one in ten people that don’t know, here’s the short version: this reserve is our country’s back-up oil. It holds over 700 million barrels of oil with a value of $88 billion at current prices. Its somewhere in Florida or Michigan or one of those other useless states we don’t really like. Just kidding they’re in Texas, Louisiana, and a new one is going to Mississippi soon.

Anyway, this reserve buys up oil every day, about 70,000 barrels worth. That’s $8.75 million we’re spending each day on oil. Since its a government entity spending someone else’s money (mine!) they aren’t price sensitive. Hence the bill in Congress. Thankfully our elected officials thought maybe we should chill on the buying for a bit and see if prices cool off.

Turns out enough of them like the idea, and the bill passed.

Naturally, the Bush Administration opposed this. They oppose everything. They’re reasoning is that the drop in demand won’t have any effect on the price. They might be right, as 70,000 barrels a day is pretty insignificant to a country that consumes 21 million barrels of the black gold a day. What the Knights of the Round Table, I’m sorry, the Nuts of the Oval Office failed to consider is the fact that Congress wants to let the market try and cool the price a bit, saving the tax payers some dinero. I don’t think Congress really thought this cool off period would help prices.

While some could speculate the government is attempting a bit of market timing, we do have plenty of oil in place and a cease fire on the buying might be prudent. We have enough to run on just the reserve for 2 months, and then we could borrow or buy from other reserves should the world basically end and all commerce cease. The government is wasting money buying at such high prices when we currently do not need to make the purchases. I applaud you Congress for finally accomplishing something 18 months into your 24 months session. That is, unless Bush does that veto thing.

So we aren’t releasing any reserves like we did in 2005, and we’re still not drilling that black sea under Alaska, at least our government isn’t wasting millions every day buying oil at bubble prices. Progress!

Related posts:

1. Let the Congressional Games Begin: Adding Fat to Legislation
2. What Exactly is an Oil Speculator?
3. Pelosi Flexes Her Muscles, Republicans Point and Laugh; Democrats Sigh
4. Death and Taxes?  Only if You’re Poor, The Rich Don’t Pay Taxes
5. Why The Banks Aren’t Lending

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