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Director of the office of energy policy at the U.S. Treasury Philip Verleger explains why we would benefit from selling the SPR.
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ES -- drive oil prices lower.
While amazing -- to -- my next guest says selling it.
Is the best thing for the country -- for your wallet.
-- Berlet Harris president PK -- later and former director of the office of energy policy the US treasury -- joins me now on the phone.
-- when I first heard this.
I thought -- and it really strange and then as I thought about it it's brilliant one of the reasons you say.
Is because when it policy makers talk about releasing oil from the SPR.
It it makes people nervous makes traders nervous and it actually gives the price supports the right.
Exactly right -- earlier in the hour you've had Phil Flynn talking about gasoline.
And he was saying inventories are low one of the major reasons that inventories are low is that.
The inventories are no longer held by Exxon and so on they're held by companies like global partners -- -- which supplies much delinquent.
And these companies.
Cut their purchases for inventories whatever they start -- -- price pickle our prices are going to go down.
If you everybody understands that you don't wanna go by now if you think prices are going to be lower -- -- so there's just been litany -- since march of maybe will release the strategic reserves -- baby we won't.
And so invariably what everybody does is cut back.
Right absolutely it and then another reason as I was thinking about is real is complete BS -- doesn't really have that much oil anyway.
I -- the oil and it I think is at thirty or 35 days' supply depending on how you look at I think we have that statistic.
And and at the same time it's also.
Not refine fuel it's got a castle -- it's it's it's not gasoline it's it's crude oil and so you'd have to be refined.
And if you look around the world crude oil inventories are pretty -- But it's just a psychological effect the other impact is the futures market performs a very useful function for keeping prices down.
Because people a lot of investors buy futures taking prices will go up.
That allows companies to acquire inventories -- sell futures -- heads as we've been doing this for 200 years.
It's always what you get that word that -- maybe they're gonna sell the SP are the investors that might buy futures -- by the futures open interest goes down.
And so companies have to sell inventories the -- Yup that banks provide the cash for holding -- in Detroit for the that the bank still provide unlimited cash to these companies.
You really squeeze inventory that's why prices the -- life.
Also thinking that another another thing it would do is -- you've just eliminated the SPR it would send a signal that the government's not worried at all.
We have plenty -- you know we don't even need this thing anymore let's get rid of it right -- That's right now I get back in the Carter administration I was there when we started selling it and at a few years ago we needed a billion barrels now we don't need so much because of energy independent.
-- by 20/20 we're not gonna need any.
The meantime we -- collect something like seventy billion dollars by selling the oil on a regular basis just saying okay every month four point itself as much oil.
That they help you know make a small -- -- contribution to reducing that trillion dollar budget deficit that you were talk -- -- Charlie just a minute ago yeah I needed.
I mean it would bring prices down because he would have this year we don't beaded -- is -- and and it would also help close the budget deficits.
-- it's a lot of genius has anyone talked about seriously doing this to thank.
I people are gradually getting their idea -- but I live in Colorado but I spent the -- -- she -- And I've been -- people about this for about a year saying you know as we talked about the budget deficit after the election.
This is one of the contributions.
Given all the increase in production from the from the -- from the eagle for eagle for trail of thought we don't need so much.
We need all the sources also the US government for forty years or so maybe sixty.
Has been selling off strategic stocks it doesn't meet that sold off its ten strategic buckets called -- its.
This yeah this served a purpose after the soft felt.
OK well I love that it's it's an interesting and provocative idea you know you've got to come back on and tell me if you if you hear getting any traction I really do -- current -- data generated so a lot of -- that you can make you so much.
