The United States has just over 700 million barrels of crude oil deep in storage as part of the U.S. Strategic Petroleum Reserve. Today, reports have surfaced that the U.S. is considering releasing crude from Strategic Reserves to the global market in an effort to cut into Russian oil profits.
As Vladimir Putin snubs the international community with regards to Crimea and Ukraine, the world is desperate for leverage against the Putin advance. But the lessons of the Carter administration have apparently been lost on Mr. Obama. Commodity canoodling in the 70's as a means to influence Russia away from military action in Afghanistan wound up costing the American economy of the 1980's dearly.
A quick -- even shallow -- glance at what the Carter Administration was trying to do with his Soviet grain embargo reveals striking similarities. We will talk more about that in this week's blog... buckle up.
Commodities popped across the board in the days following Putin's push into Crimea on fears that grain exports from the world's breadbasket -- Ukraine -- would be disrupted. Russia has profited from that war premium on oil and the U.S. aims to hit Putin where it hurts.
To that end, the U.S. is preparing to offer 5 million barrels from Strategic Reserves on the global marketplace, hoping to influence the price of oil lower. This left-handed economic 'sanction' reeks of economic backfire, and declining oil revenues on the basis of lower sendout prices could do more to stifle growth in U.S. crude production than to influence Putin.