August 17, 2012
The US is studying plans for a potential release of oil reserves to dampen rising gasoline prices and avoid the negative effect from its sanctions against Iran.
An report from Reuters cites “a source with knowledge of the situation ” who says that the president is “dusting off old plans ” to release crude oil from the US Strategic Petroleum Reserve.
The US officials will be monitoring market conditions to see if gasoline prices go down after the September 3 Labor Day holiday, as they historically do, said the source.
In July Brent crude was trading at $90 a barrel but prices have surged in recent weeks, reaching a $120 a barrel.
The United States and other EU countries studied a potential oil release in the spring but suspended the plans until oil prices dropped.
A few months ago Britain, France,Germany and other partner nations in the Paris-based International Energy Agency (IEA) were receptive to a potential release.
They were concerned about the impact the high oil prices would have on the global economy and Iran.
However, Germany and EU nations have generally resisted the use of government-held oil inventories unless there was a sharp and deep disruption in supplies.
Although the loss of over half of Iran’s oil exports is about equivalent to the drop in Libyan shipments that prompted IEA action last year the decline has been relatively gradual and global commercial oil inventories remain relatively well-supplied for this time of year.
Tapping reserves could cause problems in the US itself, writes Reuters. The decision could spark criticism from Republicans who may see this as a political move to boost the chances of Democratic President Barack Obama in the November 6 election.
“I doubt there would be any moves to release oil supplies before the November Presidential elections. This is normally done in case of a military conflict and it is not in Obama’s interest to have a military conflict before the elections as it will have a negative impact on his ratings” Sergey Vahromeev, senior analyst from Metropol told RT.
The current US strategic reserves amount to 727 million barrels-enough for 37 days of the country’s current oil consumption.
“The US has plenty oil used for commercial purposes. If it releases its strategic oil reserves they will not last long but in normal circumstances they are more than enough.”said Sergey Vahromeev.