Premature Intervention

The Obama Administration, wanting desperately to give away more government funds (a.k.a stimulus) found itself unable to because of the looming Debt Ceiling showdown. Undeterred by the inability to spend any more money, Obama in an effort to rescue us from high gas prices, released oil from the strategic oil reserves.

This act of desperation can only be described as Premature Intervention. “If it ain’t broke, don’t fix it” is a lesson government just doesn’t seem to understand.

This move of desperation to stimulate the economy was poorly thought out, as are most of  Obama’s economic policies. Poorly thought out for the following reasons:

Gasoline prices were already on the decline dropping some $.50 a gallon since their highs some 60 days ago, and there was nothing to indicate that the downward trend would not continue. Why intervene in a situation that is already correcting itself due to market forces?

The damage had already been done. Food prices and most other consumables had already price adjusted (gone up) because of rising fuel prices. That supply of released crude will be gone way before there is any effect on food prices.

High gasoline prices alone do not constitute a national emergency which is what the strategic reserve is for. This is more of a ‘look at me I’m helping’ political maneuver by Obama.

What we should ask ourselves is how much will it cost us to replace the oil he released? If the crude we had in the strategic oil reserve cost the taxpayers $50.00 a barrel at the time it was reserved, how much will it cost us to replace it now?

If crude goes to say $70.00 per barrel in the next 12 months (which is very unlikely and $20.00 less than today’s price), then we have still lost $20.00 per barrel. Figure that times 30 million barrels and Obama’s little knee-jerk reaction just cost us $600 million.

A $600 million gamble for what, a 30 day supply of crude? The International Energy Agency has released 30 million barrels as well. Why? Who knows; I guess, to quote Forest Gump, “stupid is as stupid does.”

The economy would be far better off if this administration would just stop trying to stimulate it. It seems the only time the economy shows a sign of recovery is when Obama is out of the country. You know there is a lesson in all of this. And it’s this;

Over-stimulation can lead to premature intervention.

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