By Ben Geman - 06/24/11 12:30 AM EDT
President Obama on Thursday authorized what could be the largest ever release of oil from the nation’s Strategic Petroleum Reserve.
The White House approved the release of 30 million barrels of oil to help combat supply losses from Libya that officials said are threatening the economic recovery.
The sale would be the largest ever if all 30 million barrels are sold.
The move drew immediate attacks from a parade of senior Republicans who claimed it reeked of political opportunism. They argue that oil markets are not facing the kind of emergency that warrants tapping the 727-million barrel reserve.
“Frankly, it’s pathetic that Democrats not only block domestic energy production at every turn,” House Majority Whip Kevin McCarthy (R-Calif.) said in a statement, “President Obama is now drawing down on our nation’s ‘strategic’ oil reserve which is intended for national emergencies, not as a political tool when a President is feeling heat over high gas prices.”
The U.S. action is part of a broader coordinated release with other members of the International Energy Agency (IEA) to inject 60 million barrels of oil from emergency stockpiles into world markets over the course of 30 days.
Oil prices tumbled by more than $4 per barrel on the New York Mercantile Exchange after the announcement was made.
White House officials said the release was a necessary response to supply problems. The IEA estimates that the unrest in Libya removed 132 million barrels of prized light, sweet crude from the market by the end of May.
“The president has been deeply concerned about the impact that the disruption of oil production and exports from Libya and other countries in the Middle East has had on energy supplies globally, the tightness that that’s created in the market, and the effect of that tightness on global economic growth at home and abroad,” a senior administration official told reporters.
House Natural Resources Committee Chairman Doc Hastings (R-Wash.) said the action is a “clear admission from the Obama administration that increasing domestic oil supplies will help lower costs. Unfortunately for the past two and a half years, the Obama administration has consistently blocked efforts to expand American energy production and actively placed moratoriums on domestic development.”
A pair of Democrats from oil-producing states — Sens. Mary Landrieu (La.) and Mark Begich (Alaska) — also criticized the decision.
“I don’t think it’s going to help. It’s all for show. If we did just a little bit more drilling than headline grabbing, we’d be doing much better,” Landrieu said.
But the administration official — who stressed that the release was authorized after months of talks with oil exporting and consuming nations — said the situation in Libya is the reason why the U.S. has a stockpile to begin with.
“The U.S. maintains the Strategic Petroleum Reserve precisely for this purpose — to respond to domestic or international energy supply shortages and disruptions of significant scope or duration that have a potentially damaging effect on the economy,” the official said.
The action drew praise from several Democrats, including House Democratic leader Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.), who said in a statement that it “should calm the markets, lower prices and provide some relief for Americans whose wallets are already strained by record prices at the pump.”
Several Democrats cast it as a blow against market speculation that they allege has been driving up energy prices.
Rep. Peter Welch (D-Vt.), who has been pushing the White House to tap into the oil reserves in recent months, said the release sends a “chilling signal to speculators to back off.”
“This is short-term but necessary to let the speculators know that the administration will be on the side of the consumer and small businesses that have been hammered by the price run-up in oil,” Welch told The Hill in a short interview Thursday.
The White House is steering clear of predicting how the release could affect prices.
“We don’t anticipate or predict prices. What we are addressing is an impact caused by a supply disruption. And at this time it’s necessary to do it because we’re about to enter into the season when demand is at its highest,” White House press secretary Jay Carney said Thursday.
The administration official said the release is intended to “complement” the efforts of countries in the Persian Gulf — including Saudi Arabia — and elsewhere to boost production by up to 1.5 million barrels per day for the balance of the year.
Emergency sales from the U.S. stockpiles, which are stored in salt caverns along the Gulf Coast, to address supply disruptions that threaten the economy are rare. They occurred in 1991 at the outset of Operation Desert Storm and again in 2005 after Hurricane Katrina wreaked havoc on the Gulf oil production and refining sector.
Andrew Restuccia contributed.
This story was last updated at 8:30 p.m.