The announcement today... is huge. This is the first time on record that I can see that the Department of Energy in cooperation with the International Energy Administration is opening strategic stockpiles for a non-disruption event.
The opening of the SPR because of high prices during an economic slowdown is huge. This could potentially now be something that becomes more regular when oil prices are high during economic downturn.
The opening of the SPR in the upcoming weeks is the first time since 2008 that a significant amount of oil will be drawn from the government stockpiles held in salt water caverns in Louisiana, and is tied for the largest movement of oil ever from the SPR.
Oil prices have responded accordingly- traders perhaps taken by surprise, as I was, that the government is following through on something that has been talked about, evaluated, thought about, and finally agreed upon. This event is very important and significant because it marks the administrations attitude towards high prices.
After spending billions of dollars of taxpayer money propping up a weak and fragile economy, the administration will finally take the wildcard out of something that could (and likely has been) dogging recovery: high oil prices.
Make no mistake- the response has been immediate. Motorists will see gasoline prices continue to drop in the days and weeks ahead (barring some unforeseen major event) and the national average in the U.S. could hit $3.45 by July 4. So not only will Americans be out celebrating our nation's birthday, but spending less at the pump to do so.
This is significant for Canadian motorists as well, who could see the return to 115c/L gasoline in the weeks ahead, with some areas in Canada that could be nearing 105c/L.
There could be negative implications of this, but heck- let's just be happy today that someone's doing something about high oil prices.