U.S. to tap oil reserve for 30 million barrels

[AfricaOwn]

The federal government will release 30 million barrels of crude oil from its Strategic Petroleum Reserve, half of the 60 million barrels pledged by the International Energy Agency, over the next 30 days.

 

The move, announced on Thursday, was made in response to lost production from Libya and to head off price spikes brought on by demand from summer drivers in the United States, the world's largest consumer of oil at 18.7 million barrels a day.

 

Prices at the pump may fall slightly in coming weeks, a Duquesne University energy expert said, but the move is unlikely to keep prices low for long and could have the opposite effect once the extra supply runs dry.

 

"The release (of oil) pushes prices down now, but they won't stay there," said Kent Moors, Duquesne University political science professor and longtime oil industry consultant.

 

"As the price goes down, the demand will go up," he said. "Every time oil-product prices go down, people use more of it."

 

And greater demand equals higher prices, he said.

 

The futures price of oil trading on the New York Mercantile Exchange fell nearly 5 percent to $90.90 a barrel.

 

"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.

 

Until February, when political unrest in Libya hurt oil production, the African nation was producing about 1.5 million barrels a day.

 

The decision to tap American petroleum reserves, which hold 727 million barrels of oil in caverns along the Gulf Coast, seemed to run counter to comments President Obama made in March following the Libyan uprising.

 

"Libya, for example, does not account for a large portion of overall world production," Obama said in March. "Basically, even if Libyan oil production was suspended for a significant period of time because of the unrest there, we'd be able to fill that gap."

 

Republicans and business groups criticized the Obama administration's decision, but the move was hailed by the American Trucking Association, based in Arlington, Va.

 

"ATA appreciates the step the Obama administration and IEA have taken to relieve high oil prices," ATA President and CEO Bill Graves said. "High fuel costs hurt trucking companies by increasing operational costs and by reducing freight volumes."

 

Moors said it generally takes two weeks before changes in crude oil prices show up at the pump. And even then, prices will likely begin to climb again because demand from China and other developing countries is growing faster than expected, he said.

 

Donald Bowers is expecting the same thing. Bowers is manager of Superior Petroleum Co. in Ross, a fuel products distributor and owner of more than 30 gas stations in the Pittsburgh region. He said such moves have occurred before and prices never stay down for long.

 

"It's going to be good for a few days, then they'll be right back up," Bowers said.

 

The United States has previously tapped its reserves, including in 2005 following Hurricane Katrina and in 1990 and 1991 during the Iraq war, according to the Department of Energy.

 

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