Will the U.S. Release Oil Reserves to Ease Gas Prices?
The United States is considering whether to release oil from its strategic reserves, Treasury Secretary Timothy Geithner said on Friday, acknowledging the potential for serious supply disruptions due to conflict with Iran to negatively impact the global economy. Oil prices have been consistently rising around the world as tensions grow between Iran and the West over its disputed nuclear program. Brent crude rose above $125 a barrel on Friday.
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“There is a case for the use of the reserve in some circumstances, and we will continue to look at those and evaluate that carefully,” Geithner said on CNBC television. “Obviously Iran can do a lot of damage to the global economy,” he said. “We are working very carefully to try to minimize that risk, make sure there are alternative sources of supply from Saudi Arabia and others to help compensate for reduced exports from Iran.”
The United Nation’s International Atomic Energy Agency warned on Friday that Iran has sharply stepped up its uranium enrichment drive. The report has stirred fears in Israel, which has already threatened pre-emptive strikes on Iran’s nuclear sites to stop it from pursuing an atomic weapons program. Iran insists that its nuclear program is about clean energy, not weaponry, but has repeatedly refused to shut down the program, the very existence of which is against international law.
Tehran’s threats that it will close the Strait of Hormuz — the main shipping lane for oil coming out of the Middle East — has driven prices even higher than did initial concern over the West’s embargoes on Iranian oil imports. But Angel Gurria, secretary general of the Organization for Economic Co-operation and Development, said releasing reserves that this point would not help lower prices. Higher oil prices are the result of tensions arising from “discussions every day over the Straits of Hormuz and Israel” and “would not be solved by releasing reserves,” Gurria said at a Group of 20 meeting in Mexico City.
The International Monetary Fund warned Friday that higher oil prices pose a rising threat to the global economy, but Geithner said part of the reason oil prices were rising in the U.S. was a strengthening economy, and urged Americans to take a long view. “There is no quick fix to this. No short-term fix to this,” he said, adding that the best way to keep the economy on track would be for the United States to continue to make long-term investments to expand U.S. production so as to reduce the country’s dependence on foreign oil. He also said the government should encourage Americans to use energy more efficiently to lessen the impact of supply constraints.
A few Democratic lawmakers said on Wednesday that the White House should consider tapping oil stockpiles again to send a message to Iran that the U.S. will not back down, but so far the White House has declined to comment on talks regarding a Strategic Petroleum Reserve release. David Goldwyn, a former head of international energy affairs at the State Department, said an SPR release at this point is unlikely. “Absent a new significant disruption, it is hard to see the justification for an SPR release,” he said. “Rising gasoline prices alone are not a significant justification.”
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