Jun 23: International Energy Agency (IEA) Executive Director Nobuo Tanaka announced that the 28 IEA member countries, including the United States, have agreed to release 60 million barrels (mb) of oil in the coming month in response to the ongoing disruption of oil supplies from Libya. IEA said this supply disruption has been underway for some time and its effect has become more pronounced as it has continued. The normal seasonal increase in refiner demand expected for this summer will exacerbate the shortfall further. Greater tightness in the oil market threatens to undermine the fragile global economic recovery.
In deciding to take the collective action, IEA member countries agreed to make "2 million barrels of oil per day" available from their emergency stocks over an initial period of 30 days. Leading up to this decision, the IEA has been in close consultation with major producing countries, as well as with key non-IEA importing countries. Tanaka said, "Today, for the third time in the history of the International Energy Agency, our member countries have decided to release stocks. I expect this action will contribute to well-supplied markets and to ensuring a soft landing for the world economy."
The IEA estimates that the unrest in Libya had removed 132 mb of light, sweet crude oil from the market by the end of May. Although there are huge uncertainties, analysts generally agree that Libyan supplies will largely remain off the market for the rest of 2011. Given this loss and the seasonal increase in demand, the IEA warmly welcomes the announced intentions to increase production by major oil producing countries. As these production increases will inevitably take time and world economies are still recovering, the threat of a serious market tightening, particularly for some grades of oil, poses an immediate requirement for additional oil or products to be made available to the market. The IEA collective action is intended to complement expected increases in output by these producing countries, to help bridge the gap until sufficient additional oil from them reaches global markets.
Total oil stocks in IEA member countries amount to over 4.1 billion barrels, and nearly 1.6 billion barrels of this are public stocks held exclusively for emergency purposes. IEA net oil-importing countries have a legal obligation to hold emergency oil reserves equivalent to at least 90 days of net oil imports. These countries are holding stock levels well above this minimum amount, currently at 146 days of net imports.The IEA Governing Board will within 30 days of this notice reassess the oil market, review the impact of their coordinated action and decide on possible future steps.
In deciding to take the collective action, IEA member countries agreed to make "2 million barrels of oil per day" available from their emergency stocks over an initial period of 30 days. Leading up to this decision, the IEA has been in close consultation with major producing countries, as well as with key non-IEA importing countries. Tanaka said, "Today, for the third time in the history of the International Energy Agency, our member countries have decided to release stocks. I expect this action will contribute to well-supplied markets and to ensuring a soft landing for the world economy."
The IEA estimates that the unrest in Libya had removed 132 mb of light, sweet crude oil from the market by the end of May. Although there are huge uncertainties, analysts generally agree that Libyan supplies will largely remain off the market for the rest of 2011. Given this loss and the seasonal increase in demand, the IEA warmly welcomes the announced intentions to increase production by major oil producing countries. As these production increases will inevitably take time and world economies are still recovering, the threat of a serious market tightening, particularly for some grades of oil, poses an immediate requirement for additional oil or products to be made available to the market. The IEA collective action is intended to complement expected increases in output by these producing countries, to help bridge the gap until sufficient additional oil from them reaches global markets.
Total oil stocks in IEA member countries amount to over 4.1 billion barrels, and nearly 1.6 billion barrels of this are public stocks held exclusively for emergency purposes. IEA net oil-importing countries have a legal obligation to hold emergency oil reserves equivalent to at least 90 days of net oil imports. These countries are holding stock levels well above this minimum amount, currently at 146 days of net imports.The IEA Governing Board will within 30 days of this notice reassess the oil market, review the impact of their coordinated action and decide on possible future steps.
In the United States, Department of Energy Secretary Steven Chu announced that the U.S. and its partners in IEA have decided to release a total of 60 million barrels of oil onto the world market over the next 30 days to offset the disruption in the oil supply caused by unrest in the Middle East. He said the U.S. will release "30 million barrels" of oil from the Strategic Petroleum Reserve (SPR). The SPR is currently at a historically high level with 727 million barrels. Chu said, "We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery. As we move forward, we will continue to monitor the situation and stand ready to take additional steps if necessary."
Chu indicated that the U.S. has been in close contact with oil producing and consuming countries about disruptions to the international oil market that could affect the global economy. The situation in Libya has caused a loss of roughly 1.5 million barrels of oil per day - particularly of light, sweet crude - from global markets. As the U.S. enters the months of July and August, when demand is typically highest, prices remain significantly higher than they were prior to the start of the unrest in Libya.
The United Kingdom (UK) is contributing some "3 million barrels." Chris Huhne, UK Secretary of State for Department of Energy and Climate Change said, "This coordinated global action shows that both producer and consumer nations around the world are taking decisive steps to ensure enough oil is available. That's why we strongly welcome Saudi Energy Minister al-Naimi's statement earlier this month that Saudi Arabia and other Gulf countries will increase oil production to supply whatever the market needs."
House Speaker John Boehner (R-OH) released a statement on the SPR announcement saying, "Everyone wants to help the American people and lower prices at the pump -- especially now, in tough economic times. And it is good that the Obama Administration is conceding that increased supply will lower those costs. But by tapping the Strategic Petroleum Reserve, the President is using a national security instrument to address his domestic political problems. The SPR was created to mitigate sudden supply disruptions. This action threatens our ability to respond to a genuine national security crisis and means we must ultimately find the resources to replenish the reserve -- at significant cost to taxpayers. There is a better way: we need a sensible energy policy to increase the supply of American energy, which will lower costs and create millions of American jobs. According to the Congressional Research Service, the U.S. has 163 billion barrels of recoverable oil. Unfortunately, this administration has consistently blocked the production of American-made energy and opposed legislative efforts in the House to increase supply. House Republicans will continue to advance the American Energy Initiative and work to lower gas prices and create jobs by responsibly increasing the production of energy here at home."
House Minority Leader Nancy Pelosi (D-CA) issued a statement saying, "Today, America's families face near-record prices at the pump while Big Oil rakes in near-record profits. With speculators and special interests standing in the way of lower gas prices, with Republican leaders supporting continued giveaways to the oil industry and letting speculators off the hook, and with Middle East unrest disrupting the supply of oil worldwide, we must do everything in our power to ease the burden on American consumers. The Obama Administration is fulfilling this charge by releasing oil from our national stockpile to bring relief to our middle class, responding to calls by House Democrats, led by Congressmen Bishop and Markey. We are already seeing the results in falling oil prices. This action echoes Democratic legislation in our Clean Energy Jobs Now agenda -- the Taxpayer and Gas Price Relief Act -- that calls for a release from the SPR during periods of high gas prices, along with an end to tax breaks for Big Oil. We are sending a clear message to speculators: we stand with American consumers and businesses; we will keep working to alleviate their economic struggles; and we will place our families' interests ahead of Big Oil's bottom line."
The National Petrochemical & Refiners Association (NPRA) President Charles Drevna criticized the decision by the Obama administration to release 30 million barrels of oil from the SPR. He said, "Releasing oil from the Strategic Petroleum Reserve today, when gasoline prices are falling and there is no supply shortage, makes no sense and weakens our economic and national security. The Strategic Petroleum Reserve is an emergency lifeline to protect our nation against critical shortages in our oil supply and shouldn't be used as a Strategic Political Reserve to boost the popularity of elected officials.
"This action today will do nothing to benefit consumers. Instead, it leaves our nation vulnerable if hurricanes, other natural disasters or a foreign crisis causes a real supply shortage. These are the types of emergencies the Strategic Petroleum Reserve was created to protect against. Instead of releasing 30 million barrels of oil from our emergency supply when there is no emergency, our leaders should be drawing up plans to lift the roadblocks preventing our nation from utilizing the billions of barrels of oil and natural gas reserves right here in America. This would produce more energy, more jobs and economic prosperity. No other nation puts so many limits on the use of its own natural resources to benefit its own people."
"This action today will do nothing to benefit consumers. Instead, it leaves our nation vulnerable if hurricanes, other natural disasters or a foreign crisis causes a real supply shortage. These are the types of emergencies the Strategic Petroleum Reserve was created to protect against. Instead of releasing 30 million barrels of oil from our emergency supply when there is no emergency, our leaders should be drawing up plans to lift the roadblocks preventing our nation from utilizing the billions of barrels of oil and natural gas reserves right here in America. This would produce more energy, more jobs and economic prosperity. No other nation puts so many limits on the use of its own natural resources to benefit its own people."
The U.S. Chamber of Commerce also said it thinks the release of SPR oil "is bad energy policy." Karen Harbert, president and CEO of the U.S. Chamber's Energy Institute said,
"The Obama Administration's decision to release oil from the Strategic Petroleum Reserve is ill-advised and not the signal the markets need. Unrest in the Middle East is likely to continue for quite some time, so a temporary increase in supply is not a substitute for a long term fix. Our reserve is intended to address true emergencies, not politically inconvenient high prices. Rather than dabbling around the edges, the Administration should take steps to increase domestic production of oil -- on and offshore, like the bill the House passed last night. With U.S. crude oil production expected to decrease by 90 million barrels in the next year, the Administration should instead focus on increasing domestic production to improve our energy security, reduce our dependence on foreign oil, and create thousands of jobs."
Access a release from IEA (click here). Access a fact sheet from IEA with more details (click here). Access a table of IEA members and their latest import levels and public and private reserve levels (click here). Access a release from DOE (click here). Access a release from the UK (click here). Access a release from Speaker Boehner (click here). Access a release from Rep. Pelosi (click here). Access a release from NPRA (click here). Access a release from the U.S. Chamber Energy Institute (click here). [*Energy/Oil]
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