Since the violence in Libya began a few months ago, 140 million barrels have been lost, according to a senior administration official, "resulting in greater tightness." Little additional supply has entered the market during the same period, the official continued, particularly of the light sweet crude that Libya exports. The country is unusually rich in this high-quality variety of oil, a fact that has long engendered strong interest in Libya among Western oil companies: ConocoPhillips (COP) CEO Jim Mulva, for instance, displayed in his Houston office a photograph of himself alongside Muammar Gaddafi. The majority of the oil released from the SPR will be light sweet crude.
In a conference call with reporters, administration officials would not speculate about the impact this release might have on gasoline prices, insisting instead that the intention was to forestall any adverse effect on economic growth at home and abroad. With respect to the gasoline pump, one said that prices will be what they will be.
The president has been hinting for months that the U.S. might tap its emergency reserves, and there were questions from reporters about the timing of this announcement. Why now, for instance, and not four weeks ago, when gasoline prices were 20 cents a gallon higher? The officials would say only that this plan has been in the works for some time, and that the administration was acting in anticipation of higher demand over the summer, when refineries come back online. They also stressed that the U.S. is working in full consultation with the major oil producing countries, in particular the members of the Gulf Cooperation Council (which pointedly excludes Iran), and that the IEA effort was intended to complement a commitment by Saudi Arabia to produce an additional 1.5 million barrels per day for the remainder of the year to meet market needs. They would not say, however, whether Saudi Arabia had been informed beforehand of the U.S. decision.