Tuesday, March 6, 2012
Dems Weigh SPR Sales: More Fiscal Drag?
There have been some stories in the news lately about Democrat politicians weighing a decision to "release" oil from the Strategic Petroleum Reserve (SPR), based on a reasoning that the "release" (read: sales) of crude oil will have the effect of lowering the price of oil and would lead to lower prices for gasoline for US consumers in this election year.
This could be looked at as another case, similar to the QE2, where the government currency monopolist is surrendering it's monopolist price setting authority, and in a misguided fashion, focusing on quantity and not price.
If we look at the SPR as real assets currently held by the government sector, purchased from the non-government sector at much lower prices, the government sector selling these real assets back to the non-government sector for USD balances at current high oil prices, could be looked at as a form of fiscal drag.
After a sale from the SPR at today's high prices, the non-government sector would be left with net lower USD balances than before the government originally obtained this provision at previous lower prices.