Oil prices dropped quickly Thursday on a news report that Britain and the United States would cooperate on a release of crude oil from strategic reserves, but the Obama administration said the report was “not accurate” and played down the talks with British officials.
White House spokesman Jay Carney said, “Among the many topics of discussion the British prime minister and president had were energy issues and the situation globally with the rise in the price of oil,” but he added that “I can say very clearly that the report” that there was an agreement on specific actions or a timetable for those actions “is false. It is not accurate.”
“The report of any kind of agreement or timetable associated with an agreement on a course of action is just wrong,” Carney said.
Earlier, Reuters reported that Britain had agreed to cooperate with the United States to dampen high oil prices and prevent them from slowing down economic growth in an election year.
On the New York Mercantile Exchange, the price of the benchmark West Texas Intermediate grade of crude oil, which had climbed to $106.18 a barrel, fell about $2 a barrel. They started climbing again in early afternoon after the White House denied the Reuters report.
Many oil experts said the Obama administration would remain under pressure to release strategic reserves because of the soaring price of gasoline. Deputy Secretary of Energy Daniel Poneman was in Kuwait for a conference earlier this week and warned oil exporters that high prices could derail the economic recovery.
Bob McNally, president of the consulting firm Rapidan Group, said, “It’s more when rather than if. Washington is getting ready for it. How much and when I’m not sure, but I imagine in time for spring gasoline season.” McNally warned, however, that a release would not have a lasting impact.
The high price of crude oil has been driving a sharp increase in gasoline prices, which in turn have been battering Obama’s approval ratings. The United States maintains a 696 million barrel Strategic Petroleum Reserve in a handful of giant salt caverns along the Gulf of Mexico coast.
The reserves have been tapped only three times, first on the opening day of Operation Desert Storm against Iraq under President George H.W. Bush, then under President George W. Bush after Hurricane Katrina, and again last year when civil war in Libya curtailed the north African nation’s 1.6 million barrels a day of exports.
There have also been smaller oil swaps carried out in which companies can use some of the reserve’s oil and give back an equal physical amount at a later date. President Clinton authorized such a swap in 2000.
The strategic reserve was designed to be used only in the event of a major supply disruption, not as a tool for taming prices. The administration might argue that a series of events in places like Sudan, Yemen and Syria have added up to a loss of several hundred thousand barrels a day. But those conditions aren’t likely to change, analysts noted, and therefore markets could remain tight.
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