Bulk up the SPR, prop up the dollar?

Has it occurred to anyone else that there's there's an agenda other than "energy security" behind President Bush's proposal to double the size of the Strategic Petroleum Reserve?

After all, salting away that oil will add to world demand, and presumably add to the price, which sure won't do anything to help Bush's Nixonian poll numbers.  And as Bloomberg reports, the United States might not be alone in this endeavor:

George W. Bush's decision to double the emergency oil stockpile in the U.S. may help to stem a six- month slide in prices as China, India and South Korea also add to demand by bolstering their defenses against shortages.

Oil gained the most since September 2005 yesterday after the U.S. Energy Department said it will boost the Strategic Petroleum Reserve to 1.5 billion barrels over 20 years. China, where imports rose 15 percent last year, began to fill its reserve in October. India also plans to double its inventories.

The U.S. plan “helps puts a floor in the market,'' said Antoine Halff, head of energy research at Fimat USA Inc. in New York. “It creates competition for the same barrels. It tightens the market on top of the strategic reserve builds elsewhere such as China.''

So why would Bush be pursuing this course of action knowing there's a good chance it will contribute to higher oil prices?  Lefty conspiracists will no doubt say it's to help Bush's oil cronies, but a more sophisticated answer may lie in Tuesday's edition of the Daily Pfennig.  Chris Gaffney writes:

Ty Keough pointed out an article yesterday that appeared on Bloomberg.com with this headline, "OPEC Dumps $10.1 Billion of Treasuries as Oil Tumbles". It looks like OPEC nations are unloading Treasuries at the fastest pace in more than three years as crude oil prices tumble. Over the last several years, the big oil exporting nations have purchased massive amounts of U.S. debt with the petrodollars they have earned from record high oil prices. As oil prices have sold off, these countries have reduced their holdings of U.S. treasuries. According to the Bloomberg article, for every $10 drop in the price of a barrel of oil, OPEC members adjust Treasury holdings by about $34 billion.

When you combine this reduction of available 'petrodollars' with Asia's focus on diversification, it does not bode well for the U.S. dollar. Last year, the Asian monetary authorities, together with the central banks and state investment agencies in oil-exporting countries, bought about $770 billion in foreign-currency assets. These official purchases financed most of the estimated $870 billion U.S. currency account deficit in 2006, according to research by the Federal Reserve Bank of NY. If the petrodollar surpluses dwindle, the job of sustaining U.S. consumption will fall squarely on the Asian central banks, which have already stated a desire to reduce exposure to the U.S. markets. This is not shaping up to be good news for the U.S. dollar!

Could it be that bulking up the Strategic Petroleum Reserve is a conscious attempt at propping up the dollar?  Stranger things have happened…