Obama Hints U.S. Might Tap Petroleum Reserves To Combat Libya Oil Disruption
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WASHINGTON -- President Obama on Wednesday appeared to raise the possibility that the administration would release oil from the nation’s strategic petroleum reserve to provide relief to Americans grappling with high gas prices.
Speaking at a gathering of personal finance writers at the White House, Obama suggested the conflict in Libya has removed large enough flows of oil from the global supply to perhaps justify a release of oil from the nation’s emergency stockpile to address soaring prices.
“My general view has been that the strategic petroleum reserve is to be used when you don’t have just short term fluctuations in the market, but where you have a disruption,” Obama said. “Libya has taken 125 million barrels off the market. We’re examining broadly what that means in terms of the oil market.”
The violence in Libya has frozen output from a country that once produced about 1.5 million barrels of oil a day, or 1.8 percent of the world's supply. The stalled production began in late February and has shown no signs of abating.
As fighting and instability in the Middle East in the past months have led investors to fear a broader supply disruption, the price of oil has skyrocketed. The price of Brent crude, a global benchmark, has risen more than 60 percent in the last year, as of Wednesday's close. Oil is trading at levels that recall 2008, when months of record-high energy prices helped drag the economy into recession.
Gas prices have followed oil prices, sapping precious resources from households and businesses. A gallon of regular gas now costs an average of $3.75, according to the American Automobile Association. Every penny increase at the pump tears about a billion dollars from the economy yearly, economists say.
Obama emphasized Wednesday that, over the longer term, the only sustainable relief will come through expanded production of domestic oil, greater conservation efforts and the embrace of renewable energy like wind power, solar and geothermal.
Indeed, the President delivered his impromptu remarks to reporters as an interruption to a briefing that focused largely on the administration’s efforts to spur greater production of electric vehicles, boost energy efficiency and pursue other clean energy initiatives.
The President pointed to fundamental changes at work in the global economy, particularly the rise of a consumer class in fast-growing countries, arguing that greater conservation must be at the center of national energy policy.
“China and India have a couple of billion people who want cars,” Obama said. “Medium and long term, the only solution to high gas prices is lower demand.”
The administration is taking measured steps toward that goal while also emphasizing the development of domestic sources of energy, an adviser stressed during a briefing.
The adviser, Heather Zichal, said the earthquake and tsunami in Japan, which brought a nuclear reactor in that country to the brink of meltdown, has prompted no misgivings about expanding nuclear in the United States.
“The administration absolutely believes in the future of nuclear, and we believe it can be developed safely and responsibly," Zichal said.
She also emphasized that domestic oil production would be expanded, noting that American crude oil production last year reached its highest level since 2003.
Obama's suggestion Wednesday came as the U.S. government increases pressure on Libyan leader Muammar Gaddafi to step down and cede power to the Libyan people. In a news conference with German Chancellor Angela Merkel on Tuesday, Obama said it is "just a matter of time" before Gaddafi leaves power.
Foreign producers were considering a plan to boost oil output to help curb rising prices, but those talks broke down Wednesday without an agreement. The Organization of Petroleum Exporting Countries had been looking at a plan from Saudi Arabia to increase output by as much as 1.5 million barrels a day.
The White House has previously said it has the right to tap the country's oil reserves to help correct a severe supply disruption.
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First Posted: 06/08/11 05:44 PM ET Updated: 08/08/11 06:12 AM ET