Has Bush Been Stacking the Cards on Oil?

The sudden price drops in the price of oil and gasoline just two months before the election have a certain smell to them but it has been difficult to pinpoint any particular thing that has been going on. For one thing, there's usually a mild price drop at the end of summer though this year the price drop was sharp and started somewhat earlier than usual. Even the Gulf of Mexico oil find seems to be offset somewhat by the problems on the North Slope. Readers can draw their own conclusion from the following article in CNN Money (h/t to The Oil Drum):

The Energy Department said Monday it will hold off buying replacement oil for the nation's emergency petroleum stockpile through the winter heating season in order to keep more supplies on the market.

To help make more oil available for producing gasoline over the summer and help lower then-soaring pump prices, President Bush in April ordered the Energy Department to delay deliveries and purchases of oil for the Strategic Petroleum Reserve until this autumn, which began Sept. 22.

The department needs to replace some 11 million barrels of crude oil that it sold last year from the stockpile for $600 million to oil companies that needed help after Hurricane Katrina disrupted petroleum supplies.

However, the department expects to delay buying that replacement oil during the winter, when demand for heating oil is strong, according to department spokesman Craig Stevens.

"Right now, I think we're comfortable with that amount that's in the reserve. We certainly don't want to effect the market too greatly by doing anything [to reduce available winter supplies]," Stevens told Reuters.

"Even if we started purchasing [the 11 million barrels] today, it would take us several months to take that kind of deposit. But there is no plan as of right now to begin that purchase," he said.

For most of the last year, we have not been adding to the Strategic Petroleum Reserve. This is after we drew down a portion of the reserves after Hurricane Katrina and had to borrow gasoline supplies from other nations. The Strategic Petroleum Reserve was created for a reason. If something happens in the Middle East or other events in a tight market interrupts our oil supplies, we would be in big trouble without that reserve. I consider it gross negligience not to replace and then return to building up the Strategic Petroleum Reserve, particularly since Cheney and a host of neocons have been talking about war with Iran.

Is Bush's decision not to buy more oil for the reserve enough to account for the falling prices? The answer is no, not by itself, but it probably has been a factor. There's speculation that a factor could be that some investors sympathic to Bush's low poll numbers are backing off from investments but there's no concrete proof. Other factors include the fact that Iraq's oil production is finally up (thanks, ironically, to Shiite militias guarding Iraq's oil facilities; most of those guarding the oil, by the way, are controlled by Sadr). Also, more refinery capacity has come online to handle heavier grades of crude; these heavier grades are much cheaper than light sweet crude but more expensive to process. Then there's the nasty longterm issue that as oil prices climb, poorer nations simply decide to take a smaller slice of the world oil market despite rising populations. But is Bush's decision political? I'll let the reader decide.