Energy Secretary Steven Chu said Wednesday that volatile oil prices will be reined in by spare world oil capacity without the United States having to tap into its own strategic oil reserves.
Chu said the administration is “watching the situation very closely” and he acknowledged that oil price spikes could have a “bad effect on consumers and industry and the economy.”
Chu’s comments comes as unrest in Libya, the world’s 17th largest oil-producing country, and elsewhere in North Africa and the Middle East has pushed oil prices above $100 dollars a barrel.
There is no shortage of excess supply in the world, so there is no need to tap into the reserves, Chu said. “Because we have spare capacity, we expect naturally that the market forces will take care of this,” he told reporters. “But we are concerned and we will watch it very carefully.”
However, Chu, noting that the decision to tap the reserve is ultimately up to President Obama, said the administration will continue to monitor oil prices.
“You reevaluate that position if the price continues to rise because we have a very fragile economy,” Chu said. “It’s really hard to predict what’s going to happen in the next couple of days.”
A group of House Democrats asked President Obama to consider releasing oil from the reserves last week. But a leading energy expert warned, also last week, against tapping the reserve.
Oil prices have become a top issue of concern for lawmakers in recent weeks. Republicans, citing rising gas prices, have called for increased domestic oil and gas drilling in order to move off of foreign oil.
Chu, testifying at a Senate Budget Hearing on Wednesday, advocated for developing electric vehicles and increasing vehicle fuel efficiency.
“We monitor the situation very closely and we’re very sensitive to what’s going on, but again, we have to fix this problem,” Chu told reporters. “What we’re doing in terms of fuel efficiency, what we’re doing in terms of developing electrification of vehicles, what we’re going in terms of advanced biofuels is the real solution. All those things actually moderate the price of oil.”
Chu also called on lawmakers to make sure the issue is part of the policy debate even when oil prices go down. “When the price of oil goes up in the short-term, everybody gets very worried,” he said. “But when it subsides, people forget that this is a long-term problem.”