Former Locke featured speaker Dick Morris made an interesting
speculation last night on O’Reilly. It wasn’t the focus of the
discussion, but this former broker found it interesting.
The US Government has 700 million barrels of oil in the Strategic
reserves, the average cost of that supply is $27/barrel. He suggested
that we sell the oil for $60+ (just below current levels), use the
proceeds to help subsidize home heating oil prices that will be
exorbitant this winter, then restock the supplies when oil drops back
close to $30/barrel.
His “plan” would cost the Federal taxpayers nothing and alleviate the
dramatic spike in home heating oil this winter in the NE.
Now, that’s essentially a “futures” trade that speculates on the future
price of oil and artificially affects the market as well. I like
the idea of the transaction, but am conflicted by my “proper role of
government” belief structure.
There are numerous nightmare scenarios here involving oil prices
exceeding $70 or even $80/barrel, which would negate any gain.
But another consideration would be to reduce the strategic reserves
altogether. All are reasonable debatable issues.
If we took it to an absurd level, we could use the same transactions to
help fund the war, control deficits, trade imbalances and numerous
other governmental issues. But there is a reason that we don’t want
Government in this business, mainly because you’d have to have solid
leadership to complete the transaction and not change course in
mid-process.
