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Last week's dramatic decision by the US administration to strongarm the IEA into releasing strategic petroleum reserves (of which the US would account for 30 million barrels, or half of the total), is nothing but yet another example of the hobbled and incredibly short-sighted thinking that permeates every corner of the Obama administration. Because as the WSJ reports, "the move by the U.S. and its allies to release strategic reserves of oil could provide a much-needed shot in the arm for the U.S. economy, but risks inflicting lasting damage on the already tense relationship between oil producers and consumers." The move comes on the heels of the dramatic collapse in OPEC talks in Vienna two weeks ago when Saudi Arabia was effectively kicked out of the cartel, further confirmed by reports that the IEA consulted with Saudi (and China and India) in advance of its decision (more later). Additionally, "OPEC and the European Union are due to hold an energy summit in Vienna Monday that will be the first official meeting of producers and consumers since the IEA's move, and will provide a platform for OPEC members to express their disquiet over the stocks' release. However, OPEC's biggest player, Saudi Arabia, won't be present." Make that former player, in an organization now headed by the previously #2 producer, Iran (which just happens is not all that pro-US). The biggest threat, however, is that in direct retaliation against the IEA's cartel-like decision, which comes at the expense of the remaining OPEC countries, is that as Zero Hedge suspected, the next step will be a more than proportionate cut in crude production by OPEC: "Some analysts speculated that OPEC could respond to the IEA release by cutting output to offset the increased supply." What happens next is complete Nash equilibrium collapse, with a high possibility of a 1973-type OPEC oil embargo announcement in the immediate future.
The effects of the embargo were immediate. OPEC forced the oil companies to increase payments drastically. The price of oil quadrupled by 1974 to nearly US$12 per barrel. Government price controls further exacerbated the crisis in the United States, This scarcity was dealt with by rationing of gasoline (which occurred in many countries), with motorists facing long lines at gas stations beginning in summer 1972 and increasing by summer 1973.[24] The American Automobile Association reported that in the last week of February 1974, 20% of American gasoline stations had no fuel at all.[29] In the U.S., odd-even rationing was implemented; drivers of vehicles with license plates having an odd number as the last digit (or a vanity license plate) were allowed to purchase gasoline for their cars only on odd-numbered days of the month, while drivers of vehicles with even-numbered license plates were allowed to purchase fuel only on even-numbered days. The rationing led to incidents of violence, after truck drivers nationwide chose to strike for two days in December 1973 because they objected to the supplies Simon had rationed for their industry.[29] In Pennsylvania and Ohio, non-striking truckers were shot at by striking truckers, and in Arkansas, trucks of non-strikers were attacked with bombs.[29] To help reduce consumption, in 1974 a national maximum speed limit of 55 mph (about 88 km/h) was imposed through the Emergency Highway Energy Conservation Act. In the United States, the retail price of a gallon of gasoline (petrol) rose from a national average of 38.5 cents in May 1973 to 55.1 cents in June 1974. State governments requested citizens not put up Christmas lights, with Oregon banning Christmas as well as commercial lighting altogether.[12] Politicians called for a national gas rationing program.[24] Nixon requested gasoline stations to voluntarily not sell gasoline on Saturday nights or Sundays; 90% of owners complied, which resulted in lines on weekdays.[12]
Originally posted by kro32
I fail to see how you think it's "FUN" to watch nations go through an economic crisis.
Apparantly it makes you happy to see people suffer. Not good
Originally posted by kro32
reply to post by SunnyDee
Plenty of insiders said that also before Y2K hit. What a waste of time and resources.
I think there's a lesson to be learned from that time period.
Originally posted by SunnyDee
Originally posted by kro32
reply to post by SunnyDee
Plenty of insiders said that also before Y2K hit. What a waste of time and resources.
I think there's a lesson to be learned from that time period.
Just because some past issue did not happen, does not mean a future serious event won't happen. Your flippant attitude does not serve to enlighten anyone.
Originally posted by SunnyDee
reply to post by kro32
Y2K was not the same situation. Today we have 2,3,4,5 wars going on, financial instability, corrupt government, unemployment.....in general a whole hell of a lot of turmoil, that makes for a possible oil problem, duh.