Bashing the Price of Crude – Stimulus by Stealth

Last month the International Energy Agency (IEA) announced that it will release 60 million barrels of oil from strategic reserves over an “initial period” of 30 days. The 28 IEA member countries agreed to the measure in response to “the ongoing disruption of oil supplies from Libya” but it’s obvious to me that this is a form of stimulus by stealth.

Global leaders are clearly concerned that already weak economic growth in the west is slowing and with the Fed’s 600 billion QE2 programme now ended they are looking at other ways of providing a boost to their economies. High oil prices, thanks primarily to the weak US dollar, have been a huge drag on growth. Therefore bashing the price of crude should provide some economic relief, at least in the short-term, however we have strategic oil reserves for a reason and with the Atlantic hurricane season already under way this might prove to be a very shortsighted move.

 

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