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Friday, June 24, 2011

Supposedly a little bit of oil doesn't matter, except when it does.

How many times have you read that this or that potential oil reserve or discovery should not be tapped because of environmental concerns? The capstone on the argument is almost always: “…and this amount of oil will only supply the US for 2 months, 6 months, 2 years … (pick your time frame) and therefore will not reduce the price of oil."

Need proof that this claim is a bogus as a bad wig? Yesterday (Thursday) the US government announced that it would release 1 million barrels of oil from the Strategic Petroleum Reserve for 30 days. That’s a total of 30 million barrels for those of you with an MBA. The US consumes 18.8 million barrels of oil per day so the release represents less than 2 days worth of US oil consumption, yet the price of oil dropped about $10 per barrel - over 10% - based on this minuscule addition to the available supply.

So the next time some idiot with access to the MSM prints nonsense about the effect of increased supply on oil prices, politely tell him his wig has slipped.

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