Odd Lots A Concrete Plan to Bring the Price of Oil Down Right Now
Jun 22, 2022
Skanda Amarnath, Executive Director at Employ America, and Rory Johnston, founder of Commodity Context, delve into the pressing issue of soaring oil prices. They discuss urgent strategies to boost oil supply, including the use of the Strategic Petroleum Reserve and innovative interventions like a buyer's cartel. The duo highlights the intricate relationship between oil prices and the economy, warning of potential recession risks from Federal Reserve policies. They also examine domestic refining capacity challenges and the geopolitical factors complicating the energy landscape.
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Strategic Use of SPR
- The White House can use the Strategic Petroleum Reserve (SPR) to influence oil markets.
- They can offer price insurance and financing mechanisms to incentivize domestic producers.
Impact of Backwardation
- Oil producers are more concerned with future oil prices than current spot prices.
- The SPR can be used to flatten the futures curve, benefiting both consumers and producers.
Gas Tax Inefficiency
- Cutting the gas tax is a subsidy for demand and inefficient when gasoline is scarce.
- It disincentivizes consumption adjustments for those who can make them.