Not only are gas prices starting to creep up 12 days after President Obama tapped the U.S. Strategic Petroleum Reserve to relieve price pressure, but China and other foreign markets likely benefited more than American drivers, according to an analyst's blunt new report. [Strategic Oil Reserve Release Could Give Brief Economic Stimulus]
"Yes, the government can reduce the price of oil by suddenly releasing 30 million barrels from our reserves. But it does not help the United States in any way. Even if it reduces the price of gasoline by 10 cents a gallon and saves the average consumer $6 a month, it does so over the entire world, not just in our country," says financial analyst David Marotta, president of Marotta Wealth Management in Charlottesville, Va.
"Oil is bought and sold on a world market," said Marotta in his memo to clients. "So long as a free market exists for oil, the market will price oil appropriately. And the only effect of releasing our oil reserves is to lower world oil prices."
And since China now tops the United States as the world's largest consumer, it's likely that China benefited more.
"China now accounts for 20.3% of global demand compared to only 19% for the United States. So although the American consumer paid the bill for the entire release of oil, 81% of our largess benefited foreign countries. No wonder a new poll shows Obama remaining so popular overseas," he writes.
Marotta noted that the release has had little impact on the price of gas, which the latest AAA Daily Fuel Gauge Report shows a penny uptick today, according to the AAA Daily Fuel Gauge Report. "Prices were already about 21 cents lower than they had been" when Obama released the oil, said Marotta. "As this article goes to press, the current price is $3.587, showing little, if any, reduction on account of the release." [See the 10 priciest years in history for gas.]
He bluntly said that politics was at play, especially considering the reason the emergency oil reserves were tapped. "Some justified the release as a response to lost oil supplies because of the turmoil in Libya. But that happened in February. Plus Libya only represents 2% of the world oil supply, and just 6% of its oil production was disrupted. Furthermore, only 5% of the Libyan production is actually sent to the United States," said Marotta.
And he blasts the administration's attack on tax breaks for Big Oil, suggesting instead that Uncle Sam's gas taxes should be cut. "While we are arguing about Big Oil's subsidies of $18 billion over 10 years, no one seems concerned about Big Government's windfall taxes of $24.4 billion every year," said Marotta.