Sunday, September 09, 2007

Any Other Indicators

In my last "there will be no war with Iran" post, I asked if there were any other indicators I ought to be watching. Having given it some thought, I have indeed been looking at some others; for a start, I would expect that before such a strike the US Government's Strategic Petroleum Reserve would be well in line for some filling. Who knows what might happen? Better to stockpile early and often. If they were especially keen, they might also be chartering oil tankers, possibly to use them as floating storage.

There are also some financial indicators. Specifically, I would expect the issuance of Treasury bills to rise sharply in advance of any such event; as they are bank reserve assets, banks can lend against them and also discount them with the central bank. Therefore, if there was an expectation of possible crisis, it would make sense to substitute T-bills for government bonds, thus topping up banking sector liquidity and also building up the government's cash balances.

So how are they looking? Well, I looked up the SPR figures, and I was a little surprised to see that there was no sign of faster filling before the Iraq war; far from it. The stockpile was filled significantly in 2003-2004, and reached a peak of 700 million barrels in the summer of 2005 before being drawn on after Hurricane Katrina. Since January 2006 it's been gradually restocked; it should pass the 2005 value any minute now. But there is no sign of unusual haste.

Tanker rates are lower than at any time since August, 2003, with >lots of ships in the Gulf and few going to North America.

What about the financials? Well, the US Treasury website wouldn't let me get at the stats, but our superior technology rendered their crude oppression meaningless. You can get the data here; if they'll let you. Otherwise you'll have to use an SSL-based pr*xy, which is just what I did. If you look at page 7 of the charts for August, 2007 (the latest), there's an interesting comparison between the same quarters in different years. The figures have a strong seasonal variation, due to the financial year; the third quarter always sees a big reduction in T-bill issuance.

But it does look as if the period from October 2002 to June 2003 saw a swing from bonds to T-bills, and from long maturities to short. Also, the summer and autumn of 1990 saw a sudden lift in the percentage of bills as opposed to bonds in issue, which was considerably greater than the year before or after; as did the autumn of 2001 (page 10 of the document). We're currently seeing quite the opposite; even taking the seasonality into account, US bills are being withdrawn and refinanced with bonds. Of course, there are other factors that affect this, specifically monetary policy and the yield curve.


dan said...

The SPR capacity is about 727 million barrels - and the level is currently standing at about 690 million - so there's not much that can be added to it anyway. Bush has committed to doubling the SPR, but it's never going to happen.

More pertinently, the DoE put out a tender earlier this year for an 11 million barrel SPR purchase - but they were only willing to pay about $50 per barrel, so the tender ended up being withdrawn as there were no acceptable offers ( ie the US government can't afford to fill it up any further at present). It also looks like the option of royalty in kind payments to the SPR is being ignored, and the oil co's are paying cash.

I've always thought that the most likely indicator would be a crop of resignations from the JCS.

Nell said...

The ruling regime here is I think looking at a big push for further punitive sanctions at the UN Security Council despite Iranian cooperation.

Then, depending on what happens in the SC and with the Iran-IAEA progress on resolving the 'outstanding questions' (to be done by end of year), the recent/ongoing propaganda push will have laid the domestic groundwork for either "see: diplomatic triumph for tough talk" or more war noise and "only the Strong Daddy Party can protect you from the Iranian menace".

So the next period of real danger is December-January. Which is when at least two carriers will be in position.

After that I'd give a hard look at the late spring-early summer, when U.S. troop reductions will be happening (easier to move them to more protected positions if everyone's shifting around as the "surge" ends anyway).

Sam said...

I appreciate all this is logical and that many 'we will attack Iran at time X' stories have been nonsense - and given the sources possibly even planted by Republican operatives to make anti-war types look paranoid or to discover leakers.

But the idea that they will proceed logically when attacking Iran doesn't reflect the experience in Iraq. They apparently went into Iraq with no coherent planning. I see no reason to believe that they will have coherent planning if/when they attack Iran.

These guys are the sort of people who have a history of taking doubts or debating serious practical details as a sign of disloyalty and defeatism. Insiders raising such ideas as protecting the oil supply might be seen as suggesting the troops might be defeated - a suggestion which in Republican-land is the main, indeed only, cause of defeats.

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