Eighty-five dollar crude oil is obscene! The traders on the New York Mercantile Exchange are gambling with the economic health of the US and the world.
Crude oil production worldwide is in balance with refining capacity. The Saudis expressed their belief a couple of years ago that the price of crude should be in a range of $28-34/bbl.
When the Department of Energy announces on Wednesday each week inventory at refineries the traders react immediately. Recently, inventories fell by 3.5 million bbl. The market rose to $80/bbl. This is actually a modest amount of crude, about the cargo of two large tankers.
What can the government do in this emergency? We hold approximately 700 million bbl of crude in storage for emergencies. This is an emergency!
When the weekly crude in refining storage falls by say 3.5 million bbl the DOE should release this amount from storage to refiners, keeping the balance at refineries even. This should cool off the enthusiasm of the traders who are making profits and costing the American public unduly.
Most of the traders formerly dealt in pork bellies or soybeans with little or no knowledge of the oil industry. With them it’s a money game.
Henry Levkoff
Consultant
New York
