The White House announced today a large-scale release of oil from the Strategic Petroleum Reserve.
The 60 million barrel release–30 million from the U.S. reserve–reduced oil prices by $5 a barrel to $90 on Thursday. It comes as international oil prices continue to slide down from their April high of $114 a barrel. Oil prices have fallen because the worldwide economic slowdown has reduced demand for oil.
Administration officials declined to call the massive release an economic stimulus, but did say tapping the reserve is an effort to ensure “tightness” in the global oil supply will not further crimp the economy.
“The president has been focused on this for some time now… [and] has been deeply concerned about the disruption of [Libyan] oil exports,” a White House official told reporters Thursday.
Over the last few months, President Barack Obama and his appointees have repeatedly complained about high oil prices and their impact on consumers in Midwestern swing states.
In several speeches, Obama has argued that long-term development of energy-efficient autos will compensate for high prices, but he has also relaxed some of the restrictions he imposed on oil producers and drilling companies since 2009. The partial easing of these regulations was nevertheless opposed by environmentalists and those with a stake in green energy, who stand to gain politically and economically from high oil prices.
(Obama ready to release oil from petroleum reserve)
But oil energy officials say the administration’s policies are shrinking US supplies and pushing up prices.
Dan Kish, senior vice president at the Institute for Energy Research, told The Daily Caller he sees this as a political move, revealing the administration is becoming increasingly worried about the economy. “Everything they’ve done to date has been to deliberately make energy harder to produce and more expensive,” said Kish. “Now they’re tapping our strategic reserves to make prices go lower.”
Kish, however, also likened the release to the stimulus, saying tapping the SPR at this point is like “artificially print[ing] money we couldn’t make because of uncertainty caused by their policies.”
“The Strategic Petroleum Reserve was designed for energy emergencies, not political convenience,” he added.
“The Obama Administration’s decision to release oil from the Strategic Petroleum Reserve is ill-advised and not the signal the markets need,” said Karen Harbert, president and CEO of the U.S. Chamber’s Energy Institute. “A temporary increase in supply is not a substitute for a long term fix… Rather than dabbling around the edges, the Administration should take steps to increase domestic production of oil—on and offshore.”
“With US crude oil production expected to decrease by 90 million barrels in the next year, the administration should instead focus on increasing domestic production to improve our energy security, reduce our dependence on foreign oil, and create thousands of jobs,” she said.
Rep. Fred Upton of Michigan, chairman of the House Energy and Commerce Committee, also criticized the decision to tap SPR. “It’s hard to believe that the Administration would rather tap into our emergency supply than support legislation to produce and develop North American supplies, which will create American jobs,” he said in a statement.
US officials worked for several months with 28 other countries to plan the release of 60 million barrels of oil from their reserves over one month, and to persuade oil-rich Persian Gulf countries to produce more oil. The oil producers agreed to sell an extra 1.5 million barrels per day.
White House officials said the decision was made in response to the Libyan civil war, which has reduced the oil supply by an estimated 140 million barrels over the last few months. “We’re focused on the disruption of supply,” said a White House official. “140 million barrels have been taken off the market since the Libyan disruption… it has had effect on the tightness of the market,” he said.
The White House is not offering any predictions for how much gasoline prices will be reduced, the official said. “We’re not making predictions about market prices… prices will be what they are,” he said.
The oil release will also offset the normal price increases that come in the summer months, said the official. US demand spikes as people take summer vacations. Asked for their estimate of how much gasoline prices would have risen over the summer, absent the oil release, the White House official declined to comment.
Yet oil analysts say the international energy market has already compensated for the lost Libyan supply, and the sour US economy has crimped domestic demand for gasoline. That’s partly why oil prices have already fallen from their April high.
Middle East politics are also influential in shaping oil prices. For example, Saudi Arabia gets more revenue when oil prices are high, but so does its main enemy Iran. In the past, Saudi Arabia has let oil prices slide in order to deprive Iran of revenue.
The Gulf countries did not need persuading to drop their oil prices, said the White House official. “This was a not a matter of us convincing them… this was dialogue about shared interests… in global economic growth,” he said.