The International Energy Agency (IEA) announced plans to release 60 million barrels of oil from emergency stocks over the next 30 days.  Half will come from the US strategic petroleum reserve, while the other half will come primarily from emergency reserves controlled by Japan, Germany, France and Spain.  There are rumors that China also may participate.

Those who argue that this is a political move by a US President seeking re-election are missing the point completely.  Japan, Germany, France and Spain are not conspiring to help an incumbent US President.  They are very afraid of a global economy that seems incapable of recovering from the Great Recession.

The 60 million barrels that will be released onto the market over the next 30 days constitutes the largest release of oil from emergency reserves since 1991, when the Persian Gulf War disrupted supplies.  The only other release was after Hurricane Katrina disrupted supplies in 2005.

The alleged "major disruption in oil supplies" this time around is the loss of oil exports from Libya.  But that tells only part of the story.  Equally important was OPEC'S failure to reach agreement on increased production targets earlier this month, despite efforts by Saudi Arabia and Kuwait to push more oil onto global markets.

The IEA did little to hide the fact that weakness in the global economy was a significant factor in the decision to release oil onto the market now.  IEA Executive Director Nobuo Tanaka said, "I expect this action will contribute to well-supplied markets and to ensuring a soft landing for the world economy."    US Energy Secretary Steve Chu also noted the "impact on the global economic recovery” as a reason for releasing more oil onto the market.

John Howley
Orlando, Florida
6/23/2011 01:15:40 pm

I agree 100%


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