Saturday, April 29, 2006


High gasoline prices probably bring out the worst in politicians. Econbrowser evaluates some of the proposals now coming from the White House.

But what if Strategic Petroleum Reserve manipulation becomes the norm? Markets have been trained to react to Fed policy swings (real and expected). They will now be trained to react to SPR policy swings (real and expected) in approximately the same way.

The parallel is worth thinking about. FRB policy calls have only recently become respectable and there is clamor for transparency. Will SPR policy become as problematic? Is that the price we pay for having -- and manipulating -- an SPR?

Perhaps not. Oil will sooner be replaced as a source of fuel than will U.S. dollars as a medium of exchange.

But new policies do create new worries.