The proposed release of 172 million barrels of oil from the U.S. Strategic Petroleum Reserve (SPR) will leave the U.S. with its lowest reserves since the 1980s:
The proposed release of oil reserves will leave the U.S. critically short on oil (Source: The Kobeissi Letter)
First, the U.S. consumes about 9 million barrels of oil per day. So releasing 172 million will only provide a few weeks of relief.
Second, the lack of spare oil in the SPR is critical. There’s little left to sustain military operations overseas, or if something escalates, such as China making a move on Taiwan.
Finally, those reserves need to be replenished – and quickly.
At these levels, the SPR’s physical infrastructure is also at risk. That’s because it’s located in a series of underground caverns in Louisiana and Texas. But without the oil in them, the fragile geology risks collapse.
Like Keynesian economics, the idea behind the SPR is to release oil when prices are high or there are logistical problems with the traditional oil market, much like the government stimulating the economy to ward off a recession.
But it also needs to be topped up when oil is cheap – much like how Keynesian economists suggested governments run budget surpluses during good times.
As Addison and I have noted this week, several macro trends are unfolding in the stock market. The late 2020s are shaping up to be an economic era all on their own: sell financials, buy energy.
~ Andrew
P.S. Today, Addison is at The Gathering, a group of investors in an international real estate project led by Grey Swan friend and associate Ronan McMahon and his team at Real Estate Trend Alert.
The five-star Santa Maria hotel and resort, where Addison is networking to find the best deals for Grey Swan members.
Addison is getting a more in-depth look at some of the latest deals in Panama and beyond.
He’ll be recording a special Grey Swan Live! on scene in Panama City. We’ll let our paid-up fraternity members know once Addison reports in and the video is up on site. Learn more here…
