Nick Snow
Washington Editor
It would be challenging to find another recent energy move by the administration of US President Barack Obama that was more quickly criticized by so many different people than the June 23 announcement that it would release 30 million bbl of oil from the nation's Strategic Petroleum Reserve.
Many congressional Democrats said it should have happened months earlier. Republicans said it was obviously a political move. Oil and gas industry associations said it was completely unnecessary since supplies were ample and prices were easing down.
The official explanation was that the US was releasing SPR stocks as part of a 60 million bbl action by the International Energy Agency in response to the loss of 1.5 million b/d of exports from Libya due to political unrest there.
Higher demand during July and August will arrive as prices remain significantly higher than they were before Libya's political situation grew unstable, the US Department of Energy said on June 23.
But a look at the US Energy Information Administration's weekly retail gasoline price survey showed prices nationwide dropping from an average $3.96/gal on May 16 to $3.57/gal on June 27. Retail diesel fuel prices fell from $4.06/gal to $3.89/gal during the same period.
Does this mean that the US was primarily responding on June 23 to requests by European IEA members? Not necessarily, a veteran world oil market observer told OGJ.
‘A US-led initiative'
"The IEA was a willing co-conspirator, but I believe this was a US-led initiative," said Larry Goldstein, special projects director at the Energy Policy Research Foundation. The US has been talking with the Saudis about the world oil situation since early May, he said.
About 6 weeks earlier, IEA told Saudi Arabia that if it didn't act to put more oil on the world market, IEA then would, Goldstein explained. The Saudis made a positive announcement, but IEA went ahead with its release. Goldstein said the Saudis knew about the move beforehand. "One positive thing you could say about the Obama administration in this case is it did not surprise its friends," he observed.
He suggested that the White House wanted to jump-start the US economy again, but that it was running out of ways to do so. "It's ironic that this time, because it's committed to selling, and not just releasing, those 30 million bbl, US refiners, who it says have unnecessary subsidies, could benefit the most," Goldstein said.
China also could be an unintended beneficiary, he added. Market and shipping sources indicate that more barrels of sweet crude are headed there now, and could simply wind up in storage, he said.
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