Weekly Review

In this article I will further expound on my reasoning behind the ELP plan, otherwise known as “Cut thy spending and get thee to the non-discretionary side of the economy.”

I have been advising anyone who would listen to voluntarily cut back on their consumption, based on the premise that we were probably headed for a period of deflation in the auto/housing/finance sectors and inflation in food and energy prices.

On June 23rd, the International Energy Agency (IEA) and the US government announced the intention to tap strategic petroleum reserves (SPRs) of the US and other countries, with an eye to reducing oil prices. The US was to provide 30 million barrels (mb) and other countries a similar amount, for a total draw of 60 million barrels.

The market responded sharply, with oil prices falling nearly $6 / barrel within a day or two; the intervention appeared effective. But it was not too be. Within a week, oil prices had recovered the pre-announcement price. They are even higher now. The market simply absorbed and discounted the news.