US keeps option of tapping oil reserve open
WASHINGTON The Obama administration is weighing the circumstances that could warrant tapping the nation’s strategic oil reserve, aware that supply disruptions from Iran could harm the global economy, Treasury Secretary Timothy Geithner said on Friday.
“There is a case for the use of the reserve in some circumstances and we will continue to look at those and evaluate that carefully,” Geithner said on CNBC television.
President Barack Obama, who faces re-election in November, is under pressure to give Americans relief from rising gasoline prices, with Republicans blaming the administration’s energy policies for driving up oil prices to over $123 a barrel.
US consumers have seen the price of fuel jump nearly 9 cents in the past week to an average of $3.61 a gallon. The cost is expected to rise further toward $4 through the summer driving season.
Geithner said part of the reason oil prices were rising was a strengthening economy, and he urged Americans to take a long view.
“There is no quick fix to this. No short-term fix to this,” he said, adding the best strategy for the United States was to continue to make long-term investments to expand US production, reduce the country’s dependence on foreign oil and encourage Americans to use energy more efficiently.
Looming US sanctions on Iran’s oil buyers, as well as an impending European Union oil embargo, have forced countries to cut back on purchases from the world’s fifthlargest exporter of crude.
The fear of tightening supplies, exacerbated by a threat from Tehran to close the Strait of Hormuz - the main Gulf oil shipping lane - have driven prices higher.
Western nations imposed the sanctions in an effort to force Iran to abandon its nuclear program, which they say is aimed at developing a bomb. Iran says its program is peaceful.
“Obviously Iran can do a lot of damage to the global economy,” Geithner said, talking about the risk of tighter supplies. “We are working very carefully to try to minimize that risk, make sure there are alternative sources of supply from Saudi Arabia and others to help compensate for reduced exports from Iran. That is an important part of our strategy,” he said.
Last summer, the Obama administration joined other Western nations to release a total of 60 million barrels of oil in response to supply disruptions from Libya.
Oil prices fell 8 percent in the days following the announcement of that release. A handful of Democratic lawmakers on Wednesday said the White House should consider tapping stockpiles again to send a message to Iran that the United States is willing to use its emergency reserves.
Geithner defended the administration’s decision to impose sanctions on Iran, saying if Tehran was successful in obtaining nuclear weapons that it would destabilise the region, oil markets and the global economy.