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Thursday, July 7, 2011

Who bought the 30mil of US oil reserves?

Last week the President decided to release 30 million barrels of oil from America's 'Strategic Petroleum Reserves' (SPR).  Now you would think that this oil is simply sent off magically to oil refineries which then send the crude oil out to all the gas stations of the nation for people to put in their vehicles.

Right?    Well..  No.

The oil is auctioned off.   Like a commodity... which it is.

Recently various parties had bid on various quantities of oil, which ended up fetching an average bid of $107.20 per barrel. Did you know:  Among the buyers besides the expected oil companies like ConocoPhillips, ExxonMobil and Hess, was JP Morgan, which purchased 1.5 million barrels. Barclay's Bank also purchased 200k barrels.

30mil. barrels x $107.20 = $3.216 Billion in US revenue.. I believe that's enough for another month or so of continued war

** For the full list, click on the pic below to expand to readable size.

Did you also know that as of 7/6/11, the price of oil per barrel was $97.42.  That means all these oil companies and banks paid $10more per barrel than the trading price.  Now why would that be?  If the oil was released into the public today, it would constitute a loss in profit.  Unless...  Yep, you got it-- unless the oil is to be held onto until a crisis or speculators drive the price of oil high enough (maybe $140/barrel) that they can sell that extra oil off at a profit.

But still, why would the US Government do that?  Why sell to mostly oil companies a product that they already acquire and sell?  Simple-  this is a 'hedge bet'.

The US is currently conducting military operations in 6 nations- Afghanistan, Iraq, Libya, Yemen, Pakistan and Somalia.  It also knows that it doesn't take much for another crisis to occur which will cause oil to spike up.   So the Administration, knowing that $5 gas will make people nuts, dramatically de-rail the so-called 'recovery' (and hurt re-election chances), use the oil from SPR to set up a hedge or temporary buffer against that magic $5 amount.

So the oil is sold at $107/barrel.  The oil companies and banks keep it in tankers in the middle of the ocean and do nothing but go in circles.  If/when oil spikes to a level which makes the $107/barrel oil profitable to sell to the public, the oil will be taken to the refineries, synthesized and then sent to your local gas station.  You'll be paying probably $4.50- $4.75 for it but at least its not $5, right?   As for the banks' oil holdings- they'll sell it to the oil companies once their allotments run out.  

And if oil doesn't go up?   Um, no, it will...

The everyday person can never catch a break.. Ever.  He/she must always be profited off of.

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