U.S. To Release Oil From Reserve To Boost Supply
Posted on June 23rd, 2011 by Julian Kirby | Tags: Reserve, Reserve Boost
Wary of a new surge in gas prices, the Obama administration has decided to release 30 million barrels of oil from the country’s emergency reserve as part of a broader international response to lost oil supplies caused by turmoil in the Middle East and North Africa, particularly Libya.
Oil prices dropped nearly 5 percent Thursday in response to the announcement.
The release from the U.S. Strategic Petroleum Reserve will amount to half of a 60 million barrel international infusion of oil planned for the world market over the next month.
“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,” Energy Secretary Steven Chu said Thursday.
Oil plunged nearly 5 percent Thursday after the International Energy Agency said it will release 60 million barrels of oil from its reserves to make up for a loss of Libyan exports in global oil markets.
The IEA, which includes the U.S., will release 2 million barrels per day over the next 30 days.
The IEA said the oil will help offset the loss of about 132 million barrels of high-quality Libyan crude, cut off by continuing unrest there.
“Although there are huge uncertainties, analysts generally agree that Libyan supplies will largely remain off the market for the rest of 2011,” the agency said.
Benchmark West Texas Intermediate for August delivery fell $4.59, or 4.8 percent, at $90.82 per barrel on the New York Mercantile Exchange. Brent crude, which is used to price many international varieties, lost $6.78, or 5.9 percent, at $107.39 per barrel on the ICE Futures exchange.
Retail gasoline prices in the U.S. dropped for the 20th consecutive day to $3.61 per gallon.
The Obama administration said the uprising in Libya has resulted in a loss of about 1.5 million barrels of oil a day. The release comes as the United States approaches a period of high energy use in July and August.
High oil prices and the resulting increase in the cost of gasoline have contributed to an economic slowdown and have put increased political pressure on President Barack Obama.
The government is wary of dipping into the petroleum reserve, releasing oil from it only in extreme cases, such as hurricanes, that affect oil supplies. The reserves — 727 million barrels stored in salt caverns along the Texas and Louisiana coasts — were created in response to the Arab oil embargo in the 1970s and last tapped in 2008 after hurricanes Gustav and Ike hit.
Another factor weighing down oil prices was Federal Reserve Chairman Ben Bernanke’s warning that the U.S. economy was recovering more slowly than expected and after the International Energy Agency announced the release of 60 million barrels of oil.
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