Working Papers

Profiting from Government Oil Hoarding

Alan Reynolds on speculating against the Strategic Petroleum Reserve:

Energy Secretary Bodman announced he had “approved a request for a loan of oil from the Strategic Petroleum Reserve” and “continues to review other requests as they come in.’’

That announcement should have been made by the president at least a week before the hurricane actually hit. He should have said, “The United States stands ready to replace all oil production loss resulting from the hurricane for as long as necessary.” If that had happened, oil would now be at least $10 a barrel cheaper than it is. Since 1991, however, it has always been safe for traders to bet against the SPR being used in such a serious way.

posted on 05 September 2005 by skirchner in Economics

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