US uses oil reserves to lower prices

Click to follow
The Independent US

President Bill Clinton authorised a limited release of oil from the US strategic reserves yesterday in what was officially described as a "precautionary" measure to fend off a possible shortage of winter heating fuel. However, the move was widely seen as political, designed to bring down petrol prices before the presidential election in November.

President Bill Clinton authorised a limited release of oil from the US strategic reserves yesterday in what was officially described as a "precautionary" measure to fend off a possible shortage of winter heating fuel. However, the move was widely seen as political, designed to bring down petrol prices before the presidential election in November.

The decision was announced by the Energy Secretary, Bill Richardson, shortly after the markets closed in New York. It followed an urgent plea from Vice-President Al Gore, who had urged Mr Clinton to tap into the reserves to pre-empt sky-high fuel prices this winter. The decision marks a sharp change of policy by the Clinton administration. Oil was last released from the Strategic Petroleum Reserve during the Gulf War in 1991.

A Downing Street spokesman said: "We hope that this move, along with other efforts being made at international level, will help to bring about a reduction in oil prices in the very near future." However, the amount released may not be enough to quell demands for the Government to reduce the level of fuel duty.

The initial release will be 30 million barrels, a fraction of America's weekly consumption. It is also just a small proportion of the 571 million barrels of crude in the reserve.

Members of Congress from the north-eastern states had lobbied for intervention to curb prices, which rose in recent days as high as $38 a barrel - the highest price since the Gulf War. Democrats feared that the price issue could frustrate their hopes of winning control of Congress in November.

But the official reason for the move was the low level of heating oil stocks on the eve of winter, which has helped to spur prices. Mr Richardson said that the release was 'not a price issue', but a matter of supply. Challenged to explain why the Administration had tapped into reserves that were intended for 'a rainy day', he responded: 'We think this is a rainy day'. There was, he said, 'a danger of potential disruption' and this was a 'necessary, precautionary step'.

Comments