Global oil reserves tapped in effort to cut cost at pump – ‘You don’t get elected with gas at $4 a gallon’
By JACKIE CALMES
Published: June 23, 2011 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 $5 a barrel to around $90. Of the total amount of oil to be released, about half would come from reserves in the United States, with the rest 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. Similar unified action was taken in 1991 at the outbreak of the first Persian Gulf War. “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,” said Energy Secretary Steven Chu in a statement. “As we move forward, we will continue to monitor the situation and stand ready to take additional steps if necessary.” The Dow Jones industrial average lost 165 points at the opening of trading, shortly after the announcement from Paris, but some traders said the large drop was partially a reaction to a sharp increase in weekly claims for jobless benefits in the United States. […] One person with knowledge of the decision said it appeared to be driven by several factors: the United States political calendar; the need to bring down prices for advanced economies; the expected increase in demand as the summer vacation season gets under way; and frustration at the failure by OPEC to raise production. “You don’t get elected with gas at $4 a gallon,” he said. “If you were looking solely at fundamentals, the I.E.A. would have moved after the Libyan crude came off the market.” He added: “It looks like it’s about price management, but you will never hear that from the I.E.A.”
