No one can really justify the ridiculous moves in the price of oil. MarketWathc.com bleated yesterday (and should be shot for it--everyone connected with the stupid website) about the "rup-up" continuing to be fueled by a "decline" in government inventory figures (now only ALMOST the highest level of oil in 35 years, instead of absolutely the highest inventory of crude oil in 35 years). But even some CNBC people are almost apologetic when they start "explaining" the ridiculous moves in the price of oil. They start talking about a "small" market (compared with the equity markets)--virtually adimitting that the whole market is FICTION--computer gamers in action. This, of course, fails to explain the almost equally ridiculous moves since last October in the supposedly larger equity markets. That leaves MY explanation: These truly are the Stupidest People on Earth. Once you get past the apology for a "market" sick unto death (as, really, all financial markets are now sick unto death, and controlled by the computer gamers), you encounter the CHINA explanatioini.
This gets us back to my brother--the co-owner of Shippers Transport, the trucking company that Obama failed to save while trying to save the more unworthy outfits like GM, the big banks, Wall Street, etc.). One of the things that confirmed for my brother that President Bush was the stupidest, and worst, President of all time was what President Bush did with the Strtegic Oil Reserve. President Bush not only failed to SELL oil out of the Strategic Oil Reserve to try to stop the rampant speculation driving oil futures to a ridiculous price of $147 a barrel (defesnible, in my view, as the oil reserve was not intended as a central planning device to control oil prices), but Preisdent Bush continued to advocate PURCHASING oil for the Strategic Oil Reserve as the price headed toward $140 a barrel. This infuriated my brother--rightly. It was "no brainer" stupid--beyond stupid, in fact. The fact that Bush had to be dragged, kicking and screaming, to accept the Congressional legislation to stop this insane "policy" of purchasing oil at any price does indicate that President Bush's second term (much more than Iraq) was an example of sustained stupidity rarely seen in previous Presidents. I still regard President Bush as "only" the fourth worst President in my lifetime (ahed of Johnson, Carter and NIxon), but that view was strongly challenged by the sheer stupidity, and really grave damage done to conservatives, Repubilcans, and the country, of President' Bush's second term. The man became a saboteur for the Age of Obama. This incredible stupidity as to oil purchases for the Strategic Oil Reserve AT ANY PRICE had very little real impact, but as an example of stupid hard-headedness it was an accurate symbol of Bush's second term. It was indefensible, and those (like President Bush) who could not see that have no excuses. Thjey are beyond my help (beyond the help of this blog).
One of the explanation then for the bubble in oil prices was the "hoarding" of oil by China. Look at what an admission of STUPIDTY that was (stupidity by US--not by China). No, it does not "explain" the sheer fiction of oil prices rising to $147 a barrel just as world oil demand was crashing (in fthe face of adequate supply, even then). But China's purchases of oil did provide an EXCUSE for the Stupidest Peop;le on Earth (Wall Street and financial markets--including the commodity markets) to drive up the price of oil, when there was NO economic justification for it. But if China was "hoarding" oil (a pejorative term suggesting doing something wrong), what were WE doing continuing to purchase oil for the Strategic Oil Reserve? What kid of EXAMPLE were we setting for China? STUPID, right? Yes, I am calling my President (at that time) bonde deep stupid, and I am saying that kind of stupidity was typical of his second term.
Okay. You should get the idea by now. One of the "explanations" of the recent irrational rise in the price of oil (it not being the "rise" that is irrational, although it is hard to understand how it could occur in a real free market in oil, but the AMOUNT of the rise) is renewed "stockpiling" by China.
Guess what? Yep. WE have also (according to my brother, who keeps up with this stuff) renewed "stockpiling" of oil by resuming purchases for the Strategic Oil Reserve when oil fell way down below $40 a barrel (to about $35 a barrel). Now this was actaully a RATIONAL act on our part, as renewed purchases by China would be RATIONAL (at LOW prices).
Let me be as blunt as I can on this: It is bone deep, no brainer stupid for us to be purchasing oil for the Strategic Oil Reserve ABOVE $50 a barrel. But we SHOULLD be using LOW prcies to build that reserve. Presumably China made that same decision. Note, however, that his is hardly a reason for the prcie of oil to rise 80%. That is insanity by the Stupdiest People on Earth.
Do you think Cina has learned by noew? I truly hope so. I would hate to think they are as stupid as President Bush was in his second term, even though the evidence is that they were making the same mistake of purchasing oil AT ANY PRICE (even as the world supply of oil was adequate). If China is NOT as stupid as President Bush, then they will STOP "stockpiling" oil during these irrational price rises. In fact, EVERYONE (other than the insane computer gamers responsible for the fiction in the first place) should STOP buying oil at these fictional levels set by the oil futures market. That includes us. We should STOP buying oil again for the Strategic Oil Reserve again. Is Obama really smarter than President bush? This will be a test.
Now my brother would go further. As readers of this blog know, I OPPOSE using the Strategic Oil Reserve as a central planning method of trying to control the price of oil. However, I would go with my brother, at least to a dgree, on this one.
Let us review the intelligent policy here. We should BUILD our oil reserve when prices are LOW. What is the old stock market advice (before the momentum traders and computer gamers took over)? Oh, you know BUY LOW, AND SELL HIGH. That means most sane people should be SELLING oil futures now, as oil prices have gone into another insane bubble.
However, the purpose of the Strategic Oil Reserve is NOT to control world oil prices. Therefore, I would not start SELLING now, even though oil prices have--irrationally--almost doubled.
But what if oil prices continued up, and reached--say--$80 a barrel? My brother says, and I agree, that we should then start selling the ADDITIONAL oil purchased at LOW prices, at about the same rate we had been purchaseing oil. If "stockpiling" affects the psychology" of the Stupidest People on Earth to the extent of driving oil futures irratiionally higher, then we should see what happens if we do what private individuals should be doing: BUY LOW, AND SELL HIGH. This would not be an attempt to CONTROL oil prices. It would be an attempt to keep government policy from perversely helping the speculators drive up the price of oil. Nor would it be good to do what Newt Gingrich advocated (at exactly the time we did not need to do it, which is typical of "central planning"). Newt, in case you forget, advocatd selling a full 50% of our Strategic Oil Reserve.
My brother and myself only suggest reversing RECENT purchases of the Strategic Oil Reserve, as an example for China and everyone else. This would involve a very MINOR part of the reserve, and we would again BUILD the reserve when oil prices were low.
To me and my brother, this is the reational way to build a strategic reserve with minimum distortions to the free market (lol) in oil. BUY LOW, AND SELL HIGH. Since President Obama has shown no reluctance to try to control everything, I would hope he would see the merits of this. The danger, of course, is that President Obama WILL "use" the Strategic Oil RFeserve as a device to CONTROL oil prices, instead of merely trying to keep "stockpiling" from having a perverse effect on oil prices. But that danger exists with everything Obama does, because of his authoritarian, central planning soul.
This is an area where Obama may lurch into approximately the correct policy, for the wrong reasons.
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