The Obama administration will release 30 million barrels of crude oil from the U.S. Strategic Petroleum Reserve, while partner countries in the International Energy Agency release another 30 million.
Energy Secretary Steven Chu announced the move, citing fuel supply disruptions caused by war in Libya and other factors, but President Obama foreshadowed the move earlier this month.
The action should quickly drive down the price of petroleum-based motor fuels across the transportation supply chain, cutting costs for truckers, railroads, airlines and marine vessels. Within hours of the announcement, oil’s per-barrel price fell more than $8 to the lowest level since February.
Many economists and business leaders have said this year’s sharp spike in fuel prices has slowed the economic recovery, and some members of Congress have urged Obama to tap the SPR. During the spring, he said the 727-million-barrel U.S. oil reserve was only to be tapped in times of supply disruptions, but recently began to draw attention to the amount of oil taken out of the market by the war in oil-producing Libya.
Critics already began taking sides, with some saying the SPR tap was not necessary and others saying Obama should have acted sooner to keep the U.S. economy from weakening in recent months.
Chu suggested more action could be coming, saying administration officials “stand ready to take additional steps if necessary.”
The IEA said the releases will amount to 2 million barrels a day “over an initial period of 30 days,” and that talks leading up to this action included both consuming and producing nations. It also said the action was needed because “greater tightness in the oil market threatens to undermine the fragile global economic recovery.”