Business

Will a Release in the Emergency Oil Supply Really Help Oil Prices?

Yesterday, the news world was abuzz with reports that President Barack Obama and U.K. Prime Minister David Cameron had agreed to combat rising fuel prices with a release of strategic oil stocks.

President Obama and PM CameronPresident Barack Obama and British Prime Minister David Cameron at an NCAA tournament basketball game Tuesday (AP Photo/Carolyn Kaster)

“A formal request from the United States to the UK to join forces in a release of oil from government-controlled reserves is expected ‘shortly’ following a meeting on Wednesday in Washington between President Barack Obama and Prime Minister David Cameron, who discussed the issue,” Reuters reports.

Officials in the Obama administration, including Energy Secretary Steven Chu and Treasury Secretary Timothy Geithner, have gone on record saying that the White House has considered a U.S. oil release as a means of combating the rising price of oil.

Two sources in the White House confirmed this claim, saying that Britain would respond “positively” to the request, The Blaze reported.

However, almost immediately after news of the U.K.-U.S. “agreement” broke, White House press secretary Jay Carney emphatically denied everything.

“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,” White House spokesman Jay Carney said, according to the Washington Post, but added: “I can say very clearly that the report” that there was an agreement on releasing the SPR “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 added.

But let’s put aside the conflicting reports for a moment and ask the bigger question: would releasing the emergency oil supply really help oil prices?

For an answer to this question, we turn to Eric McWhinnie of Wall St. Cheat Sheet:

After falling on the reserve release news, major oil players such as ConocoPhillips, Chevron Corp., ExxonMobil Corp. and BP pared losses after U.S. officials and White House sources denied the reserves report and called it inaccurate.

Some analysts have speculated in recent weeks that oil reserves would be released due to high prices at the pump and the usual election year politics.

However, as the chart from The Big Picture shows below, a slight increase in crude supplies from strategic reserves have failed to stem longer-term price rises in oil.

Will a Release in the Emergency Oil Supply Really Help Oil Prices?Photo Source: Wall St. Cheat Sheet

The previous announcement to release inventories from the Strategic Petroleum Reserve came last year on June 24. The release totaled 60 million barrels globally and half of that came from the U.S.

At the time of the announcement, oil traded at $91 per barrel. Oil increased to above $97 until the actual release of the reserves on July 15. Even with the added oil supply, oil prices only fell to $88 per barrel by the time the emergency release was completed. Since then, oil prices have found a firm footing above $100 per barrel.

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According to the U.S. Energy Information Administration, the U.S. consumes about 19 million barrels of crude oil every day.  A 30 million barrel release was not even enough to cover our energy needs for two days.

World oil consumption is around 85 million barrels per day, meaning the previous total emergency release of 60 million barrels was not enough to cover just one day of world consumption.

“Like before,” McWhinnie concludes, “another release from the Strategic Petroleum Reserve is not likely to have a large or long lasting impact on crude prices.”

[Editor’s note: portions of the above are from a cross post that originally appeared on Wall St. Cheat Sheet.]

Comments (104)

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  • soybomb315
    Posted on March 16, 2012 at 9:10pm

    This is just to soften the blow of the price spike that will happen after US/Israel attack Iran. At least you crusaders will have your long awaited war. But i’m sure you will complain about how much it costs to fill the tank while we spill our blood and treasure in another middle east war

    Report Post » soybomb315  
    • TheObamanation
      Posted on March 16, 2012 at 9:22pm

      If we opened up ANWR and the Gulf … prices would drop tomorrow … obama doesn’t want that … because … that would be good for the country … It doesn’t fit in with his desire to collapse our economy

      Report Post » TheObamanation  
    • resme
      Posted on March 16, 2012 at 9:24pm

      Oil prices are related to multiple issues, One we should be able to control is the dollars “value”, Sadly we do not. How much is the dollar worth since “1913”? 1 penny

      Report Post » resme  
    • Kankokage
      Posted on March 16, 2012 at 9:33pm

      Liberals need a strawman. That way they can ignore reality which, to them, is uncomfortable.

      Reality is that prices are not set by oil companies, though the companies will not hesitate to take advantage of high prices by hiring more employees, exploring more locations (i.e. even more employees), and paying down their exorbitant debt (costs an awful lot to drill a well, you know). Prices aren’t even set by supply and demand. Instead, oil is traded on a commodities market with the price being set by a combination of US dollar value and perceived fears of flow stoppage. That’s right – it isn’t actual flow volumes, but worries about potential stoppages that drives speculative prices up. In addition, oil is tied to the US currency; when the currency value is low, it takes more currency to buy/sell oil.

      This attempt by Obama will do nothing. There is already an oversupply of gasoline in America, but because prices are high sales are down. The only way to drop prices is to a) make a serious attempt to ensure constant flow of oil to calm down speculators (if Iran/Israel freaks out, America/Canada would have it’s own supply), b) cease devaluing the dollar via printing and monetization, and c) take oil off the commodities market and allow companies to sell their own oil at their own price. You know, the free market. Right now, oil is not on a free market.

      Report Post » Kankokage  
    • lukerw
      Posted on March 16, 2012 at 9:36pm

      Obama’s Wars are not in Defense of America… but about emptying the Arsenal & Treasury… to leave the Nation defenseless. Conservatives do not want more Debt & Taxes; Conservatives are not War Mongers. There is NO Military Industrial Complex; We do not really make anything any more. We are not a Nation of Rapists, stealing Oil & Energy… rather, we pay the World Wide Market Price… but with Oil being limited to us by a Radical Liberal Government that dislikes Dirty Energy, we would prefer to drill on own land, yet we are not allowed.

      Islam has a perpetual Holy War against Jews & Christians in the name of World Wide Conquest… so, if we defend ourselves and friends… we are Not the Agressor! You are blaming the wrong Party!

      Report Post » lukerw  
    • Just4Rocks
      Posted on March 16, 2012 at 9:41pm

      My point of view—> Where are we (the USA) buying gas to replace these reserves? Will it be Brazil? What is its name “Petrobras”? The folks: We (the USA) loaned (gave) Billions of dollars (borrowed from China) to? That would be-US buying gas from Brazil so they can repay their loan to US so we can repay our loan from China. To help cover the interest to China, we (the USA) is allowing China to drill in the Gulf of Mexico,,,Is That Right?–In a nut shell.

      Report Post » Just4Rocks  
    • soybomb315
      Posted on March 16, 2012 at 9:47pm

      @lukerw
      you are right – they are george bush’s wars

      Report Post » soybomb315  
    • silentwatcher
      Posted on March 16, 2012 at 10:57pm

      No, gas prices would NOT drop (I’ll bet money on that.) That is our emergency oil supply,,,what WILL happen is that if we were to be cut off from outside oil supplies, then that emergency oil supply would continue to provide for emergency services and OUR MILITARY. Should our military have difficulties obtaining fuels, how the hell do they defend our borders should we come under attack??? Don‘t think that’s not possible.

      No, keep the oil reserves for that purpose, do not open them up for a political stunt. It would be like removing a ‘firewall’ from your computor and taking your chances on the internet.

      Report Post »  
    • Ave-Crux-Spes-Unica
      Posted on March 17, 2012 at 12:02am

      We need to increase our capacity to refine crude in addition to tapping into the arctic shelf, deep-water drilling, and other improved methods for extracting oil. Increasing supply alone is part of the solution. If this incompetent administration would do that along with granting permits for more nuclear power plants, we’d see prices drop over both the near and long terms. His Marxist mindset is to collapse this country, he is part of the 5th column I’m convinced, and we must replace him with someone who‘s both competent and serious about returning this nation to it’s founding principles.

      Report Post » Ave-Crux-Spes-Unica  
    • TomFerrari
      Posted on March 17, 2012 at 9:22am

      Depleting the SPR for political expediency is irresponsible.
      With today’s consumption rate, we only have a dozen days supply at best.
      Using a third of that for temporary political gain is egotistical and irresponsible.
      Whatever is depleted must be replaced, so it had almost ZERO effect on the supply/demand equation.
      The price does drop when irresponsible Presidents dip into it, but, it is because they are sending a clear signal that the U.S. has gotten serious about addressing the issue. However, that requires that the world BELIEVE the U.S. is willing to do something about it, and with President who votes “Present” on everything (except when directed how to vote by his handlers), the world is much less likely to believe he is going to do anything.

      When he releases the SPR onto the market, it will be a temporary change only.
      As soon as the markets realize that we aren’t actually serious about increasing supply, the prices will go right back up.

      In a blatantly self-contradictory speech this week, obama stated there was no magic bullet or no silver bullet, claiming there was nothing he could do about oil prices. Then, he blamed greedy oil companies, and completely dismissed the laws of supply and demand. He then condescends and advises us to use less oil, and tells us THAT will bring down prices. Well, if decreasing demand will affect prices, then so will increasing supply! The elitist genius knows NOTHING about economics!!

      Report Post » TomFerrari  
    • TomFerrari
      Posted on March 17, 2012 at 9:31am

      I just realized, Wile E. Coyote is in the oval office!
      The evil coyote (obama) thinks all his ACME (SOLYNDRA) contraptions will help him catch the good roadrunner (conservatives) so he can eat them!

      His voting base are those who root for the villain.

      The good news is, GOOD ALWAYS TRIUMPHS OVER EVIL.
      We don’t have the power or money to beat them.
      But, so long as we rely on Heavenly Father… HE is on our side!
      And there ain’t NO contraption from GE, SOLYNDRA, GM, the EPA, the AFL/CIO, or the UAW than can trump God!!!!!

      Report Post » TomFerrari  
    • Jinglebob
      Posted on March 17, 2012 at 10:56am

      About 5 cents for five weeks. Maybe.

      Report Post » Jinglebob  
    • Grey Eagle
      Posted on March 17, 2012 at 9:44pm

      This all for show. Clinton did the same thing and it did nothing.

      Report Post »  
  • marybethelizabeth
    Posted on March 16, 2012 at 9:07pm

    The rise in gas prices is due to the oil companies, although that is something of a misnomer, maximizing profits. They are the largest corporations in the world. They hire the best accountants. They have economic strategies that they follow.

    The oil companies used to enter into contracts at fixed prices. They let the price of oil drop so that those with long term fixed price contracts were paying a higher price then the spot market.

    When they met resistance to convert contracts to variable prices based on the spot market they threatened to withhold supply.

    Now all oil contracts are variable based pricing.

    Report Post » marybethelizabeth  
    • Mateytwo Barreett
      Posted on March 16, 2012 at 9:19pm

      So- did anybody niot see this coming when the HSIC dug BP in and demanded 20 Billion. Bless their little hearts, big oil is multinational. Last time I checked- we were the omly ones saddled with the Lyin’ King!!

      Report Post » Mateytwo Barreett  
    • TheObamanation
      Posted on March 16, 2012 at 9:19pm

      It‘s actually because obama won’t let us drill in the gulf anymore.

      Report Post » TheObamanation  
    • Voice_of_One
      Posted on March 17, 2012 at 12:49am

      Please explain to me why the oi companies only make 9 billion in profits, while the government (Federal,
      State, and Local) make 50 billion off of Taxes,Permits, and Royalties. Kinda screws the pooch, huh.

      Report Post » Voice_of_One  
  • Itsjusttim
    Posted on March 16, 2012 at 9:05pm

    Here’s why people need to get closer with God: because the U.S is going to fade away. And there is going to be many many people just itching around the world to make changes to the world here, and there which will lead to global world war, and another bout of dark ages. Now, the arrogant powers that be don’t know that because they think themselves so great, but it will not go as they plan. Thousands of want-to-be dictators will pop up all over the place.

    Report Post » Itsjusttim  
    • Itsjusttim
      Posted on March 16, 2012 at 9:08pm

      And the human population will begin to greatly recede, eventually bringing with it a New earth and Heaven. That’s the next fifty years in one paragraph.

      Report Post » Itsjusttim  
    • Itsjusttim
      Posted on March 16, 2012 at 9:13pm

      Oh now I could explain it the way many right wing religious nut-jobs believe it will happen. They think a New earth will all of a sudden manifest itself out of the clear blue sky, and come down to us.

      Report Post » Itsjusttim  
    • Itsjusttim
      Posted on March 16, 2012 at 9:21pm

      And of course there is that fire to mention that comes down out of Heaven. Well that’s when all the people who are obsessed with sports; all the people walking around medicated; all the people who are bothered by trivial daily things; all the people in the Mid-East whom sell oil lose much money; etc etc. That fire will be reality crashing down on them.

      Report Post » Itsjusttim  
    • Itsjusttim
      Posted on March 16, 2012 at 9:26pm

      The world is about to become a lawless land, and in a lawless land there is no wealth worth a crap.

      Report Post » Itsjusttim  
  • Desert Dog
    Posted on March 16, 2012 at 9:02pm

    Like putting a Band Aid on a machete wound!!!!!!!!!!!!!!!!!

    Report Post » Desert Dog  
  • johnpaulkuchtajr
    Posted on March 16, 2012 at 9:00pm

    This Daley-trained ambulance chaser is in so far over his head, it’s not even funny.

    Obammie is trying to tell the lie often enough (Third Reich) of oil prices being out of his control that people actually begin to believe him. Releasing oil from The Strategic Petroleum Reserve?

    Obammie may want to save some of that precious stuff for when his buddy Ahmadinnerjacket sets the Middle East on fire.

    It will be at that point that we get to see our Community Organizer-in-Chief really swing into action. It will be like giving a five year old a 12 gauge and a box of shells for Christmas and wishing him luck!

    We need “Ike” right now and we’ve got Alfred E. Newman!

    Report Post »  
  • TRONINTHEMORNING
    Posted on March 16, 2012 at 8:50pm

    It may drop prices for a time; thru election time; it’s all a ruse. It’s fraudulent, it’s Alinsky, it’s to get the Obama zombie voting block to cheer him and vote for him. What foolish people they are. Most are unreachable for one reason or another. We have soooo much oil in our land and this pi$$ ant, Obama; won’t allow America to work, to drill, to pursue happiness. What a horrible man.

    Report Post »  
    • Itsjusttim
      Posted on March 16, 2012 at 9:01pm

      Lets not get distracted here. Over 16 trillion in debt (but I‘m sure it’s much much more) and counting. Who’s going to want to invest in that?

      Report Post » Itsjusttim  
    • Just4Rocks
      Posted on March 16, 2012 at 9:48pm

      It is His “STASH” after all.

      Report Post » Just4Rocks  
  • kentuckypatriot
    Posted on March 16, 2012 at 8:50pm

    I’m sure they will release our reserves just in time for the election.

    ABO2012

    Report Post » kentuckypatriot  
  • jrfox
    Posted on March 16, 2012 at 8:45pm

    We need to release OBAMA first.
    The high prices are NOT caused by a shortage of fuels. It is caused by uncertainty in the stock market.
    Investers are moving to more secure stocks. Oil should be a stock that you have to take posession of when you buy it.
    He knows EXACTLY what he is doing. He is raising crude prices for SOROS.

    Report Post »  
    • jzs
      Posted on March 16, 2012 at 9:04pm

      No, releasing reserves of oil won’t have any long term effect on gas prices.

      But here is FOX news journalist – so called – John Stossel, explaining how the media has it wrong. You’re lucky to have gas prices so low he says, and there’s really nothing the government can do about it. He doesn’t mention anything about speculators driving up the cost of gas, but he does say that you should consider yourself lucky that gas prices are as low as they are, and that you should be happy that the oil industry is getting 4 billion dollars is tax relief while making record profits.

      Now, who are you going to believe. FOX News, or John Stossel?

      Stossel says “give me a break”:

      http://www.youtube.com/watch?v=HTWAt_RsWFs

      Report Post » jzs  
    • 2theADDLED
      Posted on March 16, 2012 at 9:42pm

      The Middle East does not have to sell us oil and the decline in the dollar is going to raise prices they aren’t stupid. When the Middle East refuses to sell to the U.S. who would we turn to Obama’s buddy Chaves same situation. DRILL HERE DRILL NOW.

      Report Post »  
  • Itsjusttim
    Posted on March 16, 2012 at 8:38pm

    Nope, it’s eye candy. Just an old slight-of-hand trick because the oil reserves have already been bought and paid for originally, and with the higher price per barrel that money will go to the government (almost like the government is in the oil business eh), and the decreasing value of the dollar has larger implications for it’s increasing price. Moreover only a new supply by drilling will decrease prices.

    Report Post » Itsjusttim  
    • Itsjusttim
      Posted on March 16, 2012 at 8:43pm

      I bet that makes nations who trade oil for dollars really angry when the dollar decreases. Oh come on, as if thousands upon thousands of Americans don‘t know what’s going on with you den of thieves. Why do you think so many Americans don’t give a crap about voting?

      Report Post » Itsjusttim  
    • qpwillie
      Posted on March 16, 2012 at 8:43pm

      Well, Maxine Waters said she wanted to “socialize” it.

      Report Post » qpwillie  
    • Itsjusttim
      Posted on March 16, 2012 at 8:46pm

      You know I could be a multi-billionaire if I wanted to be, but quite frankly, I’d rather inherit the earth or the Kingdom of Heaven.

      Report Post » Itsjusttim  
  • randy
    Posted on March 16, 2012 at 8:35pm

    That Oil Obama, you idiot, is for the military!
    Just another move in that SOB’s game plan to weaken the UNITED STATES OF AMERICA!

    Report Post » randy  
    • Mateytwo Barreett
      Posted on March 16, 2012 at 9:23pm

      It’s okay- we’re shrinking the military, too. Cutting benefits to veterans. But I’ll bet there is no one General, or Admiral that is going to hurt AT ALL.

      Report Post » Mateytwo Barreett  
  • neverending
    Posted on March 16, 2012 at 8:35pm

    More bs from the destructionist in chief. When does the clown stop playing games.

    Report Post »  
  • Espada
    Posted on March 16, 2012 at 8:34pm

    The renig hopeful will release the STRATEGIC (not “political) reserve just before the election.

    I pray for collapse… the dross of American society will die within three months, and we can return to Old America.

    Report Post »  
  • BBEV
    Posted on March 16, 2012 at 8:33pm

    We have the “Strategic Oil Reserve” for a reason and now are not the time to use it the time may come soon when we declare war at Iran but not now. We should be drilling for oil and digging for more coal and building more Nuclear power all are good paying jobs and made in America.

    Report Post »  
  • 13th Imam
    Posted on March 16, 2012 at 8:27pm

    Is this a trick question? Sounds just like the Social Security in that there lock box. You know, the one that has become a slush fund for ALL politicians.

    Is there actually 60 MILLION BARRELS OF OIL SOMEWHERE??

    Report Post » 13th Imam  
  • justasurvivor
    Posted on March 16, 2012 at 8:25pm

    Yes, for maybe 2 days, the price will reduce a few pennies, and then go right back up and continue rising. THEN the reserves must be replaced at the new higher price. Yes, that makes so much sense in progressiveville. But not here in the real world.

    Report Post »  
  • Snowleopard {gallery of cat folks}
    Posted on March 16, 2012 at 8:24pm

    Will it work? Nope.
    Will it ever work? Nope.

    Most likely Obama will drain the Strategic Reserves for the purpose of gaining more control when he pulls of an October suprise by starting another war in Iran or Syria or BOTH. With the oil supplies of the gulf threatened by his utter insanity, he then has one more ‘excuse’ to crush the oil companies and Federalize them.

    This is just one more part of a plan for political gain and for control.

    Report Post » Snowleopard {gallery of cat folks}  
  • cuinsong
    Posted on March 16, 2012 at 8:22pm

    We just need to replace this guy and repair the damage he has done then move on. NObama should be the mantra! His song is “The Devils Song” http://www.reverbnation.com/play_now/song_10789987

    Report Post » cuinsong  
  • TheObamanation
    Posted on March 16, 2012 at 8:21pm

    What will it take for people to agree that we need to drill for oil in this country ?

    Report Post » TheObamanation  
    • lukerw
      Posted on March 16, 2012 at 8:34pm

      Win a Civil War!

      Report Post » lukerw  
    • soybomb315
      Posted on March 16, 2012 at 9:42pm

      nothing. i dont know wny many of the states dont just start drilling….What are the feds going to do when there are 10 states with mass drilling going on – will they send the tanks in?

      Report Post » soybomb315  
  • whatthecrazy
    Posted on March 16, 2012 at 8:20pm

    NO but it will help to get us killed when we have no fuel to help protect us from being attacked.I mean what the H#$@# do people think our military uses to make all that equipment move, ALGAE? No this is not good at all and i don’t believe he (the supreme one ) even plans to replace it.Obama, what nightmares are made of………….

    Report Post »  
    • Mateytwo Barreett
      Posted on March 16, 2012 at 9:31pm

      They’re working Frverishly to put windmills on the Abrams and solar panels on the Bradleys. Or is it the other way around; ; Anyway the next deployment area is supposed to be sunny. The algae is for lubricants. Ever heard of a constipated moose?

      Report Post » Mateytwo Barreett  
  • vtxphantom
    Posted on March 16, 2012 at 8:19pm

    We need to drill here drill now. obama is a fraud. His actions are all optics.

    Report Post »  
  • Mr.Fitnah
    Posted on March 16, 2012 at 8:16pm

    Not a smart Idea Obama will get a bounce when prices drop in the fall and as unemployment climbs so demand drops off you dont mess with the SOR when you could just drill and create a long term solution.

    Report Post » Mr.Fitnah  
  • Reaganite71
    Posted on March 16, 2012 at 8:16pm

    It IS an emergency. Have you seen Obama’s poll numbers?

    Seriously though, it’s more likely to put us in jeopardy should war start in Iran.

    The perfect storm requiring a FULL level of the strategic reserve:

    The straight of Hormuz get blocked, mined, suicide boats then follow hitting tankers
    This is then followed up by Iran attacking the Saudi terminaling facilities to cause global prices to go NUTS, thereby causing the world to cave.
    Add to that,the posibility of N. Korea or Iran, from a ship in the Gulf of Mexico, launching a surface to air Nuke and detonating it over the continental US and we’re OUT of that war, out of the forgien relations business, and back in the stone age with too many problems at home to deal with.

    With the state of affairs in the world, it’s absolutely irresponsible to be drawing down those reserves at this time.

    Craven politics, that won’t work in the long run, because of his refusal to use our own resources.

    Report Post » Reaganite71  
  • youdidthis
    Posted on March 16, 2012 at 8:15pm

    Major Kong Rides the Bomb
    http://www.youtube.com/watch?v=wcW_Ygs6hm0

    slim pickens.

    careful volume abit loud.

    Report Post »  
  • lukerw
    Posted on March 16, 2012 at 8:07pm

    Obama will not be Happy… until there is nothing of Value left in the US… and no way to produce anything!

    Report Post » lukerw  
    • Darmok and Jalad at Tanagra
      Posted on March 16, 2012 at 8:16pm

      If we could just harness the Hot Air coming out of his mouth, we could power the US for the next 100 years. As far as Biden goes, he did say Obamas spine is made from steel, funny, so was the Terminators.

      Report Post » Darmok and Jalad at Tanagra  
    • Snowleopard {gallery of cat folks}
      Posted on March 16, 2012 at 8:25pm

      @Darmok – agreed on the hot air part. And as for the spine of steel Obama’s is corrupted by rust through and through.

      Report Post » Snowleopard {gallery of cat folks}  
  • Darmok and Jalad at Tanagra
    Posted on March 16, 2012 at 8:07pm

    Its going to cause a short drop in oil prices, but GAS prices will be uneffected. The release of oil won’t raise the value of the dollar.

    Report Post » Darmok and Jalad at Tanagra  
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