When my Uncle worked out in China about 15 years ago, a local dignitary was giving him a tour of the local area.
He noticed what looked line capped oil wells in the fields. When he asked what they were the official confirmed that they contained oil, which "we will only start using once we can't buy anymore from anyone else".
I've never heard of China having their own oil fields so I assume that there was something lost in the translation but regardless, it was an interesting insight into the Chinese psyche.
When my Uncle worked out in China about 15 years ago, a local dignitary was giving him a tour of the local area. He noticed what looked line capped oil wells in the fields. When he asked what they were the official confirmed that they contained oil, which "we will only start using once we can't buy anymore from anyone else". I've never heard of China having their own oil fields so I assume that there was something lo…
Charlie Munger has mentioned the same "use theirs first" approach:
"The imported oil is not your enemy, it's your friend. Every barrel that you use up that comes from somebody else is a barrel of your precious oil which you're going to need to feed your people and maintain your civilization."
> But there’s an important line to draw between that and using an SPR for ad hoc manipulation of the world’s markets. On this point, Martin Young is emphatic: “The oil stocks are not there for price management as such,” he explains, “they’re there to correct a shortage in the market because of a supply disruption.” Strategic reserves can absolutely also be used as an offensive economic weapon, however. As one example…
That's interesting, but how is any commodity able to have it's price pushed down by a single seller dumping from a fixed reserve? If the market notice that the extra supply is coming from a fixed reserve, then they'd rightly be able to infer that at some point the supply will run out, and prices will return to market value, which would in turn drive up prices again. It probably won't go back to the previous equilibrium price because of the cost of storage and interest, but it should be close.
> “Periodically when caverns are empty you can actually shoot sonar images of the caverns,” says Corbin. “And that gives you a three-dimensional way of looking at them.” Some have interesting shapes, he adds. The outline of one chamber, for example, would resemble a large flying saucer.
Mm yes this is a conspiracy theory waiting to happen
> But there’s an important line to draw between that and using an SPR for ad hoc manipulation of the world’s markets. On this point, Martin Young is emphatic: “The oil stocks are not there for price management as such,” he explains, “they’re there to correct a shortage in the market because of a supply disruption.” Strategic reserves can absolutely also be used as an offensive economic weapon, however. As one example…
I am not beyond believing that the current gutting of oil prices was done at the US's behest to damage Russia. It wouldn't take too much in the way of guarantees to Saudi Arabia to have them swamp the markets. Far more effective than military intervention.
It's certainly not beyond conception! As Assange mentioned in this interview, a wikileaks cable showed how the US departments all work together to achieve a Foreign Policy aim, for example when a a country needs to be isolated by the they work together to apply pressure in the economic, diplomatic, military and public relations realm.
> But there’s an important line to draw between that and using an SPR for ad hoc manipulation of the world’s markets. On this point, Martin Young is emphatic: “The oil stocks are not there for price management as such,” he explains, “they’re there to correct a shortage in the market because of a supply disruption.” Strategic reserves can absolutely also be used as an offensive economic weapon, however. As one example…
That's interesting, but how is any commodity able to have it's price pushed down by a single seller dumping from a fixed reserve? If the market notice that the extra supply is coming from a fixed reserve, then they'd rightly be able to infer that at some point the supply will run out, and prices will return to market value, which would in turn drive up prices again. It probably won't go back to the previous equilibri…
But this does work in practice - it basically describes OPEC's current strategy, and perhaps relates to Starbucks' ongoing market strategy, etc.
The price may return to the equilibrium price at some point, but the single seller is able to hold it low for as long as they have reserves to dump. If other sellers are dependent on sales, then they must compete.