Presidents don’t tap the Strategic Petroleum Reserve often. The first President Bush did it when the first Iraq war began; President Clinton did it in 2000; and the second President Bush did it in the wake of Hurricane Katrina.
The United States will lead an international effort to release 60 million barrels of petroleum reserves to world markets, replacing some of the oil production lost because of the conflict in Libya, the International Energy Agency announced in Paris on Thursday.
The action is aimed at reducing energy prices for businesses and consumers, and in early trading futures contracts for West Texas intermediate crude oil were down $4.50 a barrel to around $91.
The United States will release half of the total amount from the Strategic Petroleum Reserve, with the rest of the oil to be provided by other nations among the international agency’s 28 member states. Negotiations for the coordinated response have been going on in secret for weeks, according to a person involved in the talks.
“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 in a press statement. “As we move forward, we will continue to monitor the situation and stand ready to take additional steps if necessary.”
It’s not clear exactly how much effect this will have on what consumers pay at the pump, but the recent spike is due, at least in part, to the conflict in Libya, which has kept 140 million barrels of oil from international markets. The oil being released from reserves is the same type of crude that Libya produces.
The timing is also relevant to the extent that it comes shortly before July and August, when demand is typically highest.
Here’s hoping it makes a difference, and ideally, represents a sort of indirect economic stimulus.