The Obama administration will consider using the Strategic Petroleum Reserve if rising oil prices caused by turmoil in the Middle East and North Africa threaten the U.S. economy, White House Chief of Staff William Daley said.
“The issue of the reserve is one we’re considering,” Daley said on NBC’s “Meet the Press” program. “It is something that only is done, has been done, in very rare occasions. There’s a bunch of factors that have to be looked at” besides price.
Concern that the unrest will spread to major oil-producing countries has created “uncertainty” in markets, Daley said. With the recovery gaining momentum, the administration is looking at steps to mitigate the impact if crude oil, now at its highest price since 2008, keeps surging, he said.
The wave of unrest has toppled leaders in Tunisia and Egypt and hit countries including Yemen, Bahrain, Jordan, Oman, Iraq and Iran. Crude oil has risen about 18 percent since opponents of Muammar Qaddafi’s regime began an uprising a little more than two weeks ago in Libya, which holds Africa’s largest oil reserves. Oil for April delivery increased $2.51 to $104.42 a barrel on the New York Mercantile Exchange March 4, the highest settlement since Sept. 26, 2008.
That’s had a direct impact on U.S. consumers, whose purchases account for about 70 percent of the economy. The average retail price of regular gasoline was at $3.50 a gallon at the pump yesterday, compared with $2.73 a year ago, AAA said on its website.
“There’s a sense that this recovery is real and is strong and is growing, but there are factors like the price of energy that can have a serious impact on it,” Daley said.
Employers added 192,000 jobs in February, the most since last May, and the unemployment rate fell to 8.9 percent, the lowest since April 2009, Labor Department figures showed last week. In addition, retail sales probably climbed in February by the most in four months, spurred by job growth and more seasonable temperatures, according to the median forecast of 63 economists surveyed by Bloomberg News before a March 11 Commerce Department report.
President Barack Obama’s administration is facing increased pressure from some congressional Democrats to draw on the domestic reserve program as gasoline and heating oil prices increase.
‘We must be prepared to tap that emergency supply,” Jon Summers, a spokesman for Senate Majority Leader Harry Reid, said on March 4. “The main purpose of the Strategic Petroleum Reserve is to protect against significant disruptions of our nation’s oil supply.”
Daley said Obama “is very concerned; we’re trying to look at all the possible options.” He repeated the administration’s stance that there is enough output capacity in the world to deal with any disruptions from Libya, which accounts for about 1.8 percent of global supply, according to Bloomberg estimates.
Energy Secretary Steven Chu said March 1 the loss of supply from Libya “appears manageable.” Saudi Arabian Oil Minister Ali al-Naimi said on Feb. 22 that his country and other OPEC members would make up for any production losses.
The U.S. reserve holds 727 million barrels of crude oil in caverns along the Gulf of Mexico coast, according to the U.S. Department of Energy. It was established to counter supply disruptions following the Arab oil embargo of 1973-1974. The government has released some of the oil 17 times since 1985, most recently in 2008 after hurricanes Gustav and Ike struck the Gulf Coast, according to the DOE.
In August 2008, as a candidate for president, Obama called for the government to swap light crude in the reserve for heavier oil at a time when oil was at more than $120 a barrel and the average retail price of gasoline was about $3.90 a gallon. He previously opposed tapping the reserve as a brake on prices. When oil peaked at $147.26 a barrel in July of that year, President George W. Bush resisted calls to release some reserves to drive down prices.
The Obama administration’s 2012 budget proposes selling 7 million barrels of oil from the reserve, which would generate about $500 million. Chu previously said that one of the caverns storing government oil needs repair.