WASHINGTON -- U.S. Secretary of Energy Steven Chu announced yesterday that the United States and the International Energy Agency (IEA) have decided to release a total of 60 million barrels of oil onto the world market over the next 30 days to offset the disruption in the oil supply caused by unrest in the Middle East. As part of this effort, the United States will release 30 million barrels of oil from the Strategic Petroleum Reserve (SPR).
Republicans called the Obama administration's plan to tap the SPR a political move, while some Democrats said the effort to ease shortages [image-nocss] may be too little, too late, reported Bloomberg.
The move comes as retail gasoline prices dropped for the 20th consecutive day, added an Associated Press report.
The SPR is currently at a historically high level with 727 million barrels, Chu (pictured) said. This SPR release will be the largest ever, according to AP.
"We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery," he said. "As we move forward, we will continue to monitor the situation and stand ready to take additional steps if necessary."
Chu's statement added, "The United States has been in close contact with oil producing and consuming countries about disruptions to the international oil market that could affect the global economy. The situation in Libya has caused a loss of roughly 1.5 million barrels of oil per day--particularly of light, sweet crude--from global markets. As the United States enters the months of July and August, when demand is typically highest, prices remain significantly higher than they were prior to the start of the unrest in Libya.
"The administration will continue to consult closely with other consuming and producing countries in the period ahead. The decision today is intended to complement the production increases recently announced by a number of major oil producing countries."
Republicans joined the oil industry in saying the release was not needed and that more drilling is needed, said Bloomberg.
"We should look to develop our true oil reserves in the Gulf, Alaska, the Outer Continental Shelf, and our public lands," Representative Doc Hastings (R-Wash.), chairman of the House Natural Resources Committee, said in a statement. "The [SPR] is intended for situations when there's a dramatic supply shut down, not to achieve short-term political gain."
The plan would have been "more timely" had oil been released when Libyan supplies were first disrupted, said Senate Energy & Natural Resources Committee chairman Jeff Bingaman (D-N.M.).
"The [SPR] is an emergency lifeline to protect our nation against critical shortages in our oil supply and shouldn't be used as a Strategic Political Reserve to boost the popularity of elected officials," said Charles Drevna, president of the National Petrochemical & Refiners Association (NPRA), in a statement.
The United States has 727 million barrels of crude oil stored in caverns along the Gulf of Mexico coast. The reserve was established to counter disruptions after the Arab oil embargo of 1973 to 1974. The United States has released oil from the stocks 17 times since 1985, most recently in 2008 after hurricanes Gustav and Ike struck the Gulf Coast.
The release of light, sweet crude represents less than 5% of the reserves and will help meet U.S. summer driving demand, the official said. The first of the draw will be offered for sale within 24 hours, the administration official said.
"There is no supply emergency," Bill Bush, a spokesperson for the American Petroleum Institute (API), said in a statement. "We could and should be taking steps that would increase our own production by two million barrels a day or more for decades."
Democrats led by Rep. Edward Markey (D-Mass.) urged President Barack Obama to use the reserves as gasoline prices were rising. Adding 30 million barrels "will have a huge effect on the everyday lives of American families," Markey said yesterday in a statement.
The president should consider additional releases, "if this dollop proves to be insufficient," Senator Charles Schumer (D-N.Y.), said in a statement.
White House officials would not predict how the release of the oil will affect prices at the pump, although the move is intended to increase U.S. supplies during the peak summer driving season.In a press briefing, White House press secretary Jay Carney said, "We have been in discussions about this with oil-producing states for sometime now ....This is a move by the IEA, which is a 28-member organization, in a coordinated way to address a sustained, significant disruption in our oil supply caused by the events in Libya--more than 140 million barrels of oil. And that's what it's aimed at. That disruption is as real today as it was several weeks ago."He added, "We don't anticipate or predict prices. What we are addressing is an impact caused by a supply disruption. And at this time it's necessary to do it because we're about to enter into the season when demand is at its highest."
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