White House Hints At Tapping Oil Reserve
As Americans continue to ride out the recession, the White House suggested Friday it may tap into the nation’s emergency reserve in an attempt to lower gas prices.
Gas prices have been soaring due to rising tensions between Iran and the West over disputes about its nuclear program. Gas prices jumped 12 cents a gallon just this week, bringing the national average to $3.65 a gallon. Treasury Secretary Timothy Geithner told CNBC that the United States is considering a release from the Strategic Petroleum Reserve while acknowledging supply disruptions from Iran could harm the global economy.
The Christian Science Monitor reported a spur of reaction from drivers in other countries:
It hasn’t helped that Europe and Russia are experiencing a harsh winter, driving up demand for home heating oil. More Asian nations, moreover, are beginning to reduce their consumption of Iranian crude oil to comply with a Western-led crackdown on firms that buy the oil. According to some press reports, India is reducing its purchases of Iranian crude by 10 percent, while some Chinese buyers are cutting back by 20 percent. Japan has indicated it will try to reduce its purchases by more than 10 percent.
These nations are now trying to round up replacement oil, plus stockpile more in case there is a conflict, says Mr. Flynn. “People are starting to hoard oil supplies to make sure they have supplies for whatever may be coming,” he says. “If we can avoid a confrontation with Iran, the market will collapse.”
The rising price of crude oil is rippling quickly through to the price of gasoline. On Friday, the national average price of a gallon of gasoline surged another 4 cents, to almost $3.65, according to AAA.
The Los Angeles Times reported democrats and liberal groups were the first to call on Obama to open the reserve:
Democrats and liberal groups were the first to call on Obama to open the reserve. In a letter to the president this week, three House Democrats asked Obama to take an "aggressive" approach.
"We must carefully consider all immediate options in order to prevent a runaway increase in prices," wrote Reps. Edward J. Markey of Massachusetts, Peter Welch of Vermont and Rosa DeLauro of Connecticut.
But analysts and Republicans are skeptical. The reserve was intended primarily as an emergency option to blunt the impact of a supply disruption. Today's high prices for crude oil are caused partly by concerns over the potential for disruptions and the looming sanctions on Iran.
If the U.S. acts preemptively, experts said, it could squander its reserve oil and end up with fewer options in the case of an actual supply interruption. Such a disruption would occur if Iran, for example, followed through on threats to close the Strait of Hormuz.
Republicans argue, as they traditionally do, that oil reserves should only be opened up if there is a major disruption in supply, not as a way to squelch concerns about rising gas prices.