The International Energy Agency is releasing 60 million barrels of oil — half of which will be supplied by the U.S. — into the world market over the next month, as high gas prices continue to aggravate the lurching economic recovery. The price of oil quickly dropped on Thursday from nearly $95 a barrel to about $91 following the announcement, but any effect that could have at the pump won’t be felt for another month — roughly the time it takes to refine oil into gasoline.
Market analysts expect minimal decreases in gas prices, considering global oil consumption stands at 89 million barrels of oil a day.
“I think it’s a gamble,” said Tom Kloza, an analyst with the Oil Price Information Service.
Regardless, the oil infusion is largely being viewed as a political ploy by President Obama to push down gas prices at a time when polls show Americans unhappy with his work on the economy.
“This is all about the U.S. economy,” said Michelle Foss, chief economist at the Center for Energy Economics in Austin, Texas. “There are no other levers to pull. This action was an admission that our economy remains too weak and vulnerable.”
Administration officials insist that the oil infusion is not intended to directly manipulate the cost of gas, however.
“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.
The action will drain about 4 percent of the Unites States’ Strategic Petroleum Reserve, which Chu said is at a “historically high level” with 727 million barrels of oil — an amount that would last roughly 35 days in the United States.
U.S. oil reserves have traditionally been viewed as off-limits except in the case of a national emergency or war.
“Everyone wants to help the American people and lower prices at the pump, but by tapping the Strategic Petroleum Reserve, the president is using a national security instrument to address his domestic political problems,” said House Speaker John Boehner, R-Ohio. “This action threatens our ability to respond to a genuine national security crisis.”
Former President George W. Bush tapped the reserves in 2005 after Hurricane, Katrina and his father, former President George H.W. Bush, drained 17 million gallons in 1991 during the Gulf War.
The only other time the U.S. dipped into its reserves was in 2000, when then-President Bill Clinton released 30 million barrels as the price per barrel approached $40. The resulting drop in the cost of oil was short-lived, however. One month later, the attack on the USS Cole spooked the oil markets and drove up prices. Once Clinton tapped the reserve, the Organization of Petroleum Exporting Countries also stopped increasing oil production.
The administration says it prepared for that contingency this time around, and for at least the next six months, Gulf Cooperation Council countries, including Saudi Arabia, have agreed to increase oil production by at least 1.5 million barrels a day.
OPEC would not make the same commitment.
