US to release 30 million bbl from SPR over 30 days
The US will release 30 million bbl of oil from its Strategic Petroleum Reserve over the next 30 days as part of a coordinated effort by the International Energy Agency to offset supply disruptions caused by Middle East unrest, US Sec. of Energy Steven Chu announced.
OGJ Washington Editor
WASHINGTON, DC, June 23 -- The US will release 30 million bbl of oil from its Strategic Petroleum Reserve over the next 30 days as part of a coordinated effort by the International Energy Agency to offset supply disruptions caused by Middle East unrest, US Sec. of Energy Steven Chu announced.
“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,” Chu said on June 23. “As we move forward, we will continue to monitor the situation and stand ready to take additional steps if necessary.” Releases from the US and other IEA member countries will total 60 million bbl, he indicated. The US SPR currently contains 723 million bbl, a historic peak, he noted.
Chu said the US has been in close contact with oil producing and consuming countries about disruptions to the international oil market that could affect the global economy. He said the situation in Libya has caused a loss of roughly 1.5 million b/d—particularly of light, sweet crude—from global markets. Chu said as the US enters the months of July and August, when demand is typically highest, prices remain significantly higher than they were before the North African oil exporting nation’s political unrest erupted this spring.
The June 23 decision is intended to complement production increases that a number of producing nations recently announced, he continued. Chu said the US welcomes such decisions and encourages other producing nations to follow suit. He said the Obama administration would continue to consult with other oil producing and consuming nations in the weeks and months ahead.
Congress generally critical
Congressional energy leaders were generally critical. Democrats said the Obama administration should have moved sooner. “This decision would have been [timelier] if made when the disruption in Libyan oil supplies first occurred,” US Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (NM) said. “However, I hope it helps deflate speculative froth in the markets and further settles prices back to levels where most experts believe they should be.”
US Rep. Edward J. Markey (Mass.), the Natural Resources Committee’s ranking minority member, noted that he introduced legislation months ago to require DOE to release at least 30 million bbl from the SPR. “With our economy teetering on the brink of a double-dip recession, and American families still struggling during peak driving season, this is the one tool America has at her disposal to immediately help drive down prices at the pump,” he maintained. “Deploying just a small fraction of our nation’s oil reserves will have a huge effect on the everyday lives of American families and, potentially, on the health of our economy.”
Many Republicans were critical. House Energy and Commerce Committee Chairman Fred Upton (Mich.) said it was hard to believe that the Obama administration would rather tap the nation’s emergency oil reserve than support legislation that would lead to production of more North American energy. “Ironically, 30 million bbl is the exact amount of oil we could produce in just 1 month from resources on Alaska’s Outer Continental Shelf if only the [US Environmental Protection Agency] would stop blocking exploration,” he observed. “And we could exceed that production by finally giving a green light to the Keystone XL pipeline from our ally Canada, which could bring online the capacity for 1.3 million b/d.”
Observing that the SPR was created as a safeguard against emergencies and severe supply disruptions, Energy and Natural Resources Committee member John A. Barrasso (Wyo.) said the administration’s shutdown of American energy production was the only severe supply disruption at this time. “The White House has blocked offshore oil and gas production and made it more difficult to produce energy onshore,” he declared. “Oil production in the Gulf of Mexico is estimated to drop 20% in 2012 from 2010 levels. EPA is blocking offshore energy exploration in Alaska. Each day, we witness more examples of how this administration is making our energy problems worse.”
‘Makes little sense’
Oil and gas trade associations also criticized the move. “The release makes little sense for American markets,” an American Petroleum Institute spokesman said. “Crude and gasoline inventories are above average and prices have been trending downward for weeks, despite the loss of Libyan oil which markets have already adjusted to. The SPR was intended to be used for supply emergencies. There is no supply emergency.”
National Petrochemical & Refiners Association Pres. Charles T. Drevna agreed. “This action today will do nothing to benefit consumers,” he said. “Instead, it leaves our nation vulnerable if hurricanes, other natural disasters, or a foreign crisis causes a real supply shortage. These are the types of emergencies the SPR was created to protect against.”
Independent Petroleum Association of America Pres. Barry Russell suggested, “Today’s action is not a solution, but yet another decision that will only prolong the nation’s vulnerability to swings in oil prices. Drilling for more oil at home will not only increase American oil supplies, but will also create jobs and increase government revenues through taxes and royalties. Releasing oil from our strategic reserves cannot accomplish this other important goals.”
Karen A. Harbert, president of the US Chamber of Commerce’s Institute for 21st Century Energy, called the decision ill-advised and not the signal that markets need. “Unrest in the Middle East is expected to continue for some time, so a temporary increase in supply is not a substitute for a long-term fix,” she said. “Our reserve is intended to address true emergencies, not politically inconvenient high prices. Rather than dabbling around the edges, the administration should take steps to increase the domestic production of oil, on and offshore, like the bill the House passed last night.”
Contact Nick Snow at email@example.com.