Obama Tapped Oil Reserves Due To Concerns About Fragile Economy

WASHINGTON (Ayesha Rascoe, Roberta Rampton, Tom Doggett, Timothy Gardner, Jeff Mason, Tabassum Zakaria, Matt Spetalnick, and Joshua Schneyer) - Concerns about the impact of high oil prices on the fragile world economy prompted President Barack Obama to agree to release oil from U.S. emergency stockpiles, a senior administration official said on Thursday.

The 30 million-barrel release of mainly light, sweet crude U.S. oil is designed to help fill a gap in supply caused when political upheaval in Libya and Yemen disrupted global oil markets, the officials said.

The move comes as U.S. oil prices have already declined nearly 20 percent since their peak at levels above $113 a barrel.

"The U.S. stands ready to do more as is necessary to address this issue," a senior administration official told reporters, explaining officials will assess the supply situation after 30 days.

U.S. officials have been talking for months with major oil producers and consumers about whether to tap international reserves, well before OPEC declined to raise production at its meeting earlier this month, the official said.

The released stocks will complement added production promised by Saudi Arabia in the wake of the failed meeting.

The Obama administration was also concerned about how tight supplies were ahead of peak demand in the summer, when many Americans drive for vacations. Oil prices are a critical concern among voters and we rising as the White House was gearing up for its reelection campaign.

But the official refused to comment on whether the release would reduce the expensive gasoline prices that have put political pressure on the White House to take steps to ease energy costs.

(Editing by Lisa Shumaker)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[jenyouwino]

10:56 AM on 06/26/2011

Forget this flea bite bit of commentary. Did anybody notice the AP headline, "China Eyes Canada Oil, US's Energy Nest Egg?" Most likely not. Take the time to find it and read it.

Canada is already unloading oil to China, which is why (beyond taxation to frustration) they have a debt to GDP ratio 40% less than the US. People here seem to have some misconception that entitlements don't cost anything, and if they do, then we'll just tax the b'jeesus out of the rich to cover it. No, entitlements cost plenty, and Canada is sensible enough to know how to keep them funded - for now at least.

In the US, taxes will not stop with the rich, and the penalty will be onerous if our leaders continue on with their loon based energy policy. China is the largest holder of our debt. Imagine that we may be forced to siphon our lifeblood (aka oil, coal and gas) to pay them back. Is it possible that China will be in a position to tell our EPA to take a hike? Clearly, we the people cannot, but I can see the day coming where there won't be a choice. I hate to think that the energy we need for future survival will soon be floating its way to China, but as the dollar and our economy continue to weaken, you can bet oil will become their "currency of choice."

[Jon LoGotti]

11:34 AM on 06/26/2011

The FED is the largest holder of our debt now. China is the largest foreign holder and as of lately has been diversifying away from treasuries, oddly enough they have been financing Europe b/c, you know, gota keep that CNY down. China is smart to want to hold everyones debt and if their ship goes down they will bring everyone down with them if not they have significant leverage. I agree, we can develop all the technology we want to but we need to understand that the money and demand right now is coming from oil and we can easily exploit that and create a revenue stream that would pay off our debts and shrink our deficits.

[jenyouwino]

02:38 PM on 06/26/2011

Good adjunct and well put.

[Old Crow]

08:44 AM on 06/26/2011

This is the largest release from the SPR ever.... It's a hopeless attempt to shore up Obama's plummeting pole numbers. Libya exports oil to France and England, so the slight supply disruption due to the war does not effect us.

[Chubbster]

07:54 PM on 06/26/2011

Its about 36 hours of US consumption. Huge.

[IWantTofu]

09:31 AM on 06/27/2011

Without releasing any oil yet, just the announcement knocked the price down below $90/bbl. If you truly believe that the amount said to be released is meaningless in the total supply/demand balance and that everyone is over reacting, you can make a lot of money investing in oil. On the other hand, talk is cheap.

[wobblysow]

04:42 PM on 06/25/2011

Must be an election coming up. What a joke. Does he think we are all just sutpid?

[mistykane]

06:58 PM on 06/25/2011

Yes, but he's right - a lot of people are! The price of oil has been dropping ever since Saudi Arabia announced it would increase output a couple of weeks ago, but that's not what people will hear about. They'll think the drop in prices at the pump is due to Obama.

[Jon LoGotti]

11:37 AM on 06/26/2011

No, that is not when prices started to drop. The Saudi decision had a marginal effect on the price. Prices fell 13% in 1 day in early May on no news at all and that's when it started its downward trend as it broke key technical levels, growth started to slow, stop-loss levels were breached and people liquidated their assets to take in profits as they saw easy money coming to an end. This has been a speculative rally, not one based on any supply and demand fundamentals.

[Dangerous Dan]

10:36 PM on 06/25/2011

Yes, He does.

[1088]

10:51 AM on 06/25/2011

President Obama knows when to strike this problem at the right time! His patience is a virtue!
This is what's going on!

http://www.msnbc.msn.com/id/43510170/ns/business-going_green/t/surprise-oil-release-targets-speculators/

[Jon LoGotti]

11:39 AM on 06/26/2011

It would have been nice say when oil was $105 and growth was starting to slow. Not when we are in the middle of a downward trend and oil has already been going down. This was crazy.

[IWantTofu]

09:39 AM on 06/27/2011

We are not in a downward trend. Even though GDP is lower than people would like, its still expected to be positive, around 2-3% area in the second half of the year. Company earnings are up. Employment is a lagging indicator, and is increasing but the Republican spin is that if you take the increase in work force, especially from people that now have hope of finding a job, including these people you have greater unemployment.

[wlouche]

02:09 PM on 06/26/2011

Good for less than a day.

[billw8017]

02:04 AM on 06/25/2011

The strategic reserve is an odd idea. We can't pump enough everywhere in America. Stopping drilling anywhere undermines our national security, jobs, and all that. Then, we pump it back into the ground (!). We ought to designate some oil fields as our "strategic reserve," not to be touched except in the national emergency. And let it go at that.

I'm not particularly in favor of using up our oil while oil is relatively cheap, then going abroad as it becomes more rare and expensive. The oil interest are too involved in government and get to play with all their funniest ideas.

Taking oil from the national reserve strikes me as a good idea. Despite earlier threats to raid it as by Clinton during some oil spike, we haven't tested it. It would be good to know if it actually stays in the reserve and is accessible at all.

[irochfpst]

11:58 PM on 06/24/2011

good move. it wasn't just the us tapping oil reserves. other countries have increased production. now what is going to be done to limit speculation and stabilize the oil markets so that economies can get back on track.

[themodernleader]

10:57 PM on 06/24/2011

In the long run that decision endangers national security. Obama should have enforced laws on the books to thwart commodity speculation. But that would have upset his power base.

[billw8017]

02:15 AM on 06/25/2011

The release is a relatively symbolic gesture. It strikes at the most irresponsible kind of commodity speculation by demonstrating how a government doesn't have to let it run out of hand. In this way, it is good government where small efforts can have considerable and good effects. Exactly how the oil millionaires like the Koch brothers are Obama's base is something you must explain a little more.

[themodernleader]

05:55 AM on 06/25/2011

Unfettered speculation of the American variety is gambling. Both are immoral and should be outlawed for corrupting thought and diminishing performance and creativity. A dictatorial form of government would outlaw such destructive activities and put all able bodied Americans to work, probably in boots and uniforms.

[mistykane]

06:54 PM on 06/25/2011

It's not the speculators that drive the price of oil. They just react to the supply and demand and can make money whether the price goes up or down. The price of oil started going down a couple of weeks ago when Saudi Arabia announced it would increase output. Increasing supply drives down the cost.
The only reason Obama used any of the SPOR was so that he could get credit for the fall in prices at the pump. But what the market is really reacting to is the permanent increase in oil from Saudi Arabia, not the 30 day supply Obama is releasing.
The one risk Obama is taking is if the prices go back up after the SPOR oil is gone or if the supply increase from Saudi Arabia will sustain the price level.

[NoiseOfKnowing]

10:35 PM on 06/24/2011

Perfect move Mr. President. This is the stimulus plan that the Republicans can't do anything about. You should sell off even more.

[Aarroonn Fleszar]

03:53 PM on 06/24/2011

We're going to tap them now at $90 a barrel? This makes no sense at all. Looks like an attempt to boost a declining stock market through political posturing.

[Dangerous Dan]

10:39 PM on 06/25/2011

Like selling Federal interest in GM stock when it is below IPO price?
One thing you can say about Obama,
He is NOT a Capitalist.

[robrtl]

12:55 PM on 06/24/2011

when oil was at a 115 dollars no action after oil price drops 20% obama and rest release oil......3weeks after libya action starts obama starts....3yrs after election still guantanomo.... and eric holder still ag...i don't want lunch with him cause he'd be late in picking up the check and then probably wouldn't leave a tip

[dmortonrei]

09:57 AM on 06/24/2011

When oil prices hit $147 per barrel in 2008 Bush announced he would open our offshore areas and ANWAR to exploration and drilling and oil prices dropped to $30(?) per barrel........ as THE WORLD took Bush seriously.

Obama recently announced a DRILL MAYBE DRILL policy change in which MAYBE, after much deliberation, he would like, possibly, to cooperate with oil companies to "drill responsibly" to increase our domestic oil production. Oil prices dropped to $100 per barrel and thats it. The world saw it for what it was, an Obama head fake to support the economy. THE WORLD, with Obama's economic failure piling up he was in NO POSITION to abandon his far left eco-zealot political base and allow drilling.

Using the SPR is yet another temporary band-aid fix on a problem OBAMA has only made worse.

[IWantTofu]

09:46 AM on 06/27/2011

Bush was buying oil into the SOR at $120/bbl driving up prices. The $148/bbl prices slowed down the economy giving the country the greatest recession since the great depression which cut demand which tanked oil prices. That and not saying he was opening up Anwar nor the U.S. Gulf was what brought the price of oil down,. And not down to $30/bbl.

But yes, the world took Bush seriously, because if he invaded Iraq and was wrong about why he invaded that country, he could be just as wrong and invade somewhere else.

[graffitijoe]

07:31 AM on 06/24/2011

Isn't Obama also trying to manipulate oil prices?

[Loxinabox]

11:33 AM on 06/24/2011

No they dropped before he did this. He is only trying to buy votes

[HansJurieMuller]

05:30 AM on 06/24/2011

OIL PRICE MANIPULATI­ON: A JOINT VENTURE OF BP AND GOLDMAN!

Business opportunities are like buses, there's always another one coming.
http://www.buffetinvestingworld.com/

[enviro1]

05:06 AM on 06/24/2011

This is nothing new, and yet again shows a gross mismanagement of this country by the government. Instead of creating an energy plan that actually works for America, we have chosen, once again, to try to manipulate the market for what the president wants. First, he wants the price high so we move towards alternative energies, but he fails miserably on pushing green,. renewable energy, so the prices go up, that puts pressure on the economy, (was anyone truly surprised by this), yet, supposedly, the administration is confused as to what is happening to our economy....now he releases the emergency oil reserves, as his poll numbers plummet and there are rumblings of a new democrat nominee....or at least a challenger....the 535 people in DC are creating policy that affect the rest of us...and for the most part, the majority are incompetent....it's up to us to replace them, dem and repub....with people with common sense.....

[PhilipTaylor]

03:19 AM on 06/24/2011

OIL PRICE MANIPULATION: A JOINT VENTURE OF BP AND GOLDMAN!

Peter Sutherland = SIMULTANEOUSLY CHAIRMAN of BP International and Goldman International

Both win with Manipulation!

In 1989 Summers wrote an important "PUMP and DUMP" article identifying how to play momentum suckers in the market. That article is now fully incorporated in Software used by one of the most predatory BIG BANKS on Wall Street to force up OIL and FOOD prices and then DRIVE them down with Incredible Velocity for MAXIMUM LOOTING!

http://www.economics.harvard.edu/faculty/cutler/files/Speculative%20Dynamics%20and%20the%20Role%20of%20Feedback%20Traders.pdf

Goldman's Software, evidence in a hearing, was used to pump OIL up to $147 / barrel in June 2008 and then was used again to CRASH the PRICE 23% in one month and almost 80% in January 2009 at $36 per barrel. Many companies were bankrupted by the PUMP and DUMP!