On the campaign trail in Iowa this week, Vice President Cheney said the reserves would only be opened in case of an emergency, such as a disruption that causes the loss of 5 or 6 million barrels a day in imports. The U.S. last week imported about 10.4 million barrels of crude oil per day, according to the American Petroleum Institute, an industry group.
For oil companies, higher oil prices have translated into fatter profits. The Royal Dutch/Shell group, the world's third-largest publicly traded oil company, saw its profit increase last quarter by 54 percent from the same quarter last year, to $4 billion.
A man works on the pipelines of the Rumeila oil fields, near the city of Basra in Iraq.
(Nabil Juranee -- AP)
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In an unusual twist, the record run-up in oil prices in the past month has not spilled over to the gas pump.
In fact, gas prices have dropped slightly -- averaging about $1.88 for a gallon of regular yesterday, according to a AAA auto club survey -- though they remain much higher than last year. The reason is that gasoline reserves remain high thanks to refineries producing at or near capacity, more than satisfying demand from drivers.
Analysts yesterday were divided about where oil prices would go next. Some said they had no idea and that the market would be driven by world events that affect the supply of oil.
"It remains on a hair trigger," said Michael Urban, an analyst with Deutsche Bank in New York. "If you hear that a pipeline is blown up in Iraq, prices will be right back up there."
Analysts and traders have attributed the steep climb in the past month to world production running near capacity while demand has been increasing in China and elsewhere. They feared that any disruption to production caused by terrorism or unrest could lead to an oil shortage.
The pressure on prices has come from several directions recently: concern over a presidential recall vote in oil-rich Venezuela earlier this month; fighting in Najaf, Iraq, where rebels repeatedly threatened to disrupt oil production; and concerns about an ongoing dispute between the Russian government and its largest oil exporter, Yukos Oil.
Each of those concerns has eased in recent days, analysts said.
But some warned that prices could still hit -- or surpass -- $50 a barrel.
"We're seeing some relief in the short term here," said Gerald A. Taylor, a principal of the Brattle Group, a consulting firm in Cambridge, Mass. "A lot of analysts, myself included, feel like the oil price will stay high and probably turn around again."
Yesterday's retreat came despite new data from the Energy Department that some analysts had thought would send prices higher: a decline in U.S. commercial crude oil inventories. The government reported an inventory of 291.3 million barrels for last week, a drop of 1.7 million barrels from the week before.
Motor gasoline inventories remained steady, despite heavy demand. Analysts had expected to see a decline in those stocks and they said the plentiful supply helped exert downward pressure on oil prices.
