The Obama administration is monitoring oil markets and a release from the nation’s Strategic Petroleum Reserve remains “an option that is on the table” if prices rise or supply is disrupted, said Josh Earnest, a White House spokesman.
“The administration does carefully monitor the global oil market” because of its impact on the economy, Earnest said at a briefing today. No decision has been made and he refused to say whether there is active discussion about the reserve.
“In terms of how that decision’s going to get made or whether it’s going — made or what’s going to factor into that decision, I’m not able to shed any light on that,” he said.
The administration discussed planning for using the reserve earlier this year when the average retail price of gasoline in the U.S. increased to almost $4 a gallon and the European Union prepared to impose a ban on Iranian oil imports.
Oil has climbed 3.4 percent this week on concern that Israel will strike to delay Iran from producing nuclear weapons and as the United Nations Security Council conceded it couldn’t stem the violence in Syria. The U.S. got 16.4 percent of its imported oil from the Persian Gulf in 2011, according to Energy Department figures.
Discussion about the reserve comes a sensitive time in U.S. politics as President Barack Obama runs for re-election against Republican Mitt Romney with the sluggish recovery as the central issue. A steep rise in gasoline prices may crimp consumer spending, which accounts about 70 percent of the U.S. economy.
Regular gasoline at the pump, averaged nationwide, was $3.716 yesterday, according to data from AAA, the biggest U.S. motorist organization. It was $3.326 at the beginning of July.
“From a political standpoint gasoline prices are up 40 cents a gallon over the last six weeks. Going into an election you would ask yourself what is the government doing about it,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “On the other hand the cynics might say if the U.S. and other countries are considering a release of strategic stocks what do they know about a preemptive strike by Israel on Iran that they aren’t telling us.”
Oil for September delivery rose 41 cents, or 0.4 percent, to $96.01 a barrel on the New York Mercantile Exchange, the highest settlement since May 11. The price is up 9 percent in August and 13 percent in the third quarter. Brent crude for October settlement fell $1.56, or 1.3 percent, to $113.71 a barrel on the London-based ICE Futures Europe exchange.
Use of international reserves to keep prices stable was among the topics Obama discussed in May with other leaders of the Group of Eight nations at the presidential retreat Camp David in Maryland. Oil hit a high for the year of $109.77 on Feb. 24 before declining to $77.69 at the end of June.
The Obama administration today gave Maria van der Hoeven, executive director of the International Energy Agency, a tour of Strategic Petroleum Reserve facilities outside Houston, according to a person familiar with the visit who spoke on condition of anonymity.
At an earlier event at Houston’s Rice University, before the tour, van der Hoeven was asked whether the IEA had been in contact with the U.S. government about plans to release oil from the Strategic Petroleum Reserve.
“No. Why should we?” she said. “There’s no reason for that. As I mentioned before, there is not a serious disruption of supply, so there’s no reason for that.”
AAA issued a statement from its manager of regulatory affairs, Avery Ash, saying the group opposes releasing reserve oil right now.
“AAA believes that reserve oil only should be released to address high prices in the market due to emergency supply and demand fundamentals,” Ash said. “The impact on gas prices caused by the Iran sanctions policy would not meet that condition at this time.”
The Paris-based International Energy Agency coordinated the release of 60 million barrels of crude and oil products last year after Libyan output was disrupted by an armed uprising against Muammar Qaddafi. The agency also made supplies available during the 1991 Persian Gulf War and when Hurricane Katrina damaged oil rigs and refineries in the Gulf of Mexico in 2005.
Lipow said any future release probably wouldn’t be done by the U.S. unilaterally.
“A release of strategic stocks around the world has a bigger impact,” he said.
Releasing oil from the U.S. reserve hasn’t guaranteed lower pump prices over the past eight years. In four instances, gasoline rose after the announcements of supplies from emergency inventories. In 2008 and 2011, tapping stockpiles brought down the cost of a fill-up, according to data from AAA.
When the price of gasoline nears $4 a gallon, “that has all kinds of psychological impacts which actually turn into real impacts in the economy,” said John Shages, who was deputy assistant energy secretary for petroleum reserves in President George W. Bush’s administration.
“I would be concerned if they weren’t thinking about it with the way prices are changing,” Shages, now with Strategic Petroleum Consulting LLC, said in a telephone interview.
The reserve, stored in deep underground caverns along the U.S. Gulf Coast, has 696 million barrels of crude, according to Energy Department data. That’s the equivalent of 80 days worth of oil imports, the DOE says. It would take 13 days after a decision to tap it for the oil to reach the U.S. market.