[This column is co-authored with Greg Sharenow, an executive vice president in PIMCO's Newport Beach office and a portfolio manager focusing on real assets. Mr. Sharenow co-manages nearly $30bn of commodity-specific index investments.]
With oil prices climbing, the Obama administration has continually reminded Wall Street that the president might dip into the Strategic Petroleum Reserve (SPR), the nation's emergency oil stockpile, to help calm a painful rise in prices. Since February, President Obama, Energy Secretary Chu, Treasury Secretary Geithner and Interior Secretary Salazar have all stressed that the president, whose sole authority it is to tap the U.S. SPR, stands ready to sell oil from these government-controlled reserves onto the market at any time. Nearly all emphasized that the option to intervene in the market is always "on the table," as if letting the option dangle. President Obama has emphasized that the oil release could be "set in motion in a few days, not weeks, if needed." The apparent message from the White House to market participants has come through loud and clear: Push oil prices any higher and we may turn on the spigot, making you sorry that you did.