David Prosser: A pointless gesture on oil prices
Friday 22 July 2011
Outlook So that went well. A month ago tomorrow, President Obama surprised world markets by persuading the International Energy Agency to release some of its oil reserves for only the third time in its 37-year history. The oil price immediately slipped back from about $113 a barrel to about $103.
Job done? Well, not really – we were back to $118 or so yesterday, when the IEA announced it would not extend the initiative, which was initially slated to last a month. If the aim of the US-led release was to bring down oil prices, it was successful for all of a fortnight.
In truth, that wasn't the aim, for this was a political gesture as much as an economic one (which was obvious at the time, given that the last two releases of reserves came at moments of international crisis). This was the US's attempt to send a message to Opec, whose meeting a week or so earlier had failed to yield the increase in oil production for which the President had been hoping.
Unfortunately, that aim hasn't been particularly successful either. For Opec now knows that even if the IEA decides to call its bluff at such moments, the effects will be limited and temporary. As you were then.
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