Release of oil reserves pondered to cut prices

U. S. concerned higher crude prices would undermine sanctions against Iran over nuclear issue

HOUSTON — U. S. President Barack Obama faced stiff resistance to the possibility of releasing emergency oil reserves to temper prices on Friday, with key Asian allies and the head of the West’s energy agency rejecting any need for action.

A day after it was reported the White House was “dusting off” plans for potentially tapping the Strategic Petroleum Reserve, the executive director of the International Energy Agency, Maria van der Hoeven, was blunt in her assessment: “There is no reason for a release.” The IEA “bases our actions on data and reality. The market is sufficiently supplied,” she said after a speech in Houston. She said she had not discussed a potential release with members of the Paris- based IEA, which is charged with coordinating use of consumer nations’ strategic inventories.

Key members of the IEA offered varied views, reflecting a divide between those who have tended to favour a more liberal use of the world’s governmentheld stocks as a means to influence prices, and aid economic growth, and those who believe they should be reserved for supply emergencies.

While Britain and France appeared open to discussing the possibility of action, officials in Japan and South Korea said on Friday they saw no cause for action.

“It is not as if Japan is short of oil,” said a Japanese government source who declined to be named due to the sensitivity of the matter. “Stock releases are not done when the price is high but when supply is insufficient.”

A source with knowledge of the discussions said Thursday that one reason the White House was reviving old plans on reserves was to prevent rising energy prices from undermining sanctions against Iran over its nuclear program.

A European Union embargo on Iranian crude oil took full effect on July 1 in a joint effort with the United States to force Tehran to curb nuclear activities Western powers say pose a military threat, despite Iranian denials.

U. S. officials will monitor oil markets to see if gasoline prices fall after the Sept. 3 Labour Day holiday, the source said.

White House representative Josh Earnest said Friday that tapping the SPR was “an option that is on the table”.

What remains unknown is whether Obama would be prepared to press ahead with action without the full support of the IEA.

Van der Hoeven noted that total U. S. oil reserves exceeded the mandated 90- day level required by the IEA, and that Washington was not prohibited from acting alone.

“They are American supplies. They can be used for domestic reasons and for the solution of domestic problems. It’s up to them,” she said. Asked if any other IEA members were considering tapping their strategic supplies, her answer was a simple “No.”

Still, today’s energy situation is much as it was last year when Obama won IEA support for releasing 60- million barrels of oil weeks after Libya’s civil war had shut down exports, an analyst said.

The loss of about one million bpd of Iranian oil due to the sanctions is roughly the same as the loss of Libyan oil last year, oil prices are on the rise, and OECD economies are showing signs of weakness.