A pending decision by the Obama administration, to release crude oil from the Strategic Petroleum Reserve (SPR) located in Louisiana, will be able to assist in temporarily putting a halt on ever increasing gasoline prices.
- First – To answer the question asked in the headline - it will temporarily provide lower prices at the pump as motorists head out for their favorite Easter vacation spots.
- Second – It also gives East Coast and Gulf Coast refineries some relief from recent high Brent crude oil prices. (see graph below)
- Third – It sends an important message from the US it is capable of protecting its domestic market as Iran threatens to close down the Strait of Hormuz, which is used by for shipping 20% of the world’s crude oil exported from the Middle East.
On Friday, February 24, 2012 Brent crude oil price gained another $2 settling at $125.47 a barrel. West Coast Intermediate (WTI) increased about $2 to close at $109.77 a barrel. Brent presents a “truer” price in the world of oil trading since the WTI - Cushing,Oklahoma benchmark price is landlocked as well as controlled by the big Wall Street hedge funds and oil speculators.
Saudi Arabia said it would pump as much as 1.5 million more barrels a day during the current crisis putting them over the 10 million barrels per day mark. On June 21, 2011, the Saudis Prince Turki Al Faisal if Saudi Arabia said they could effect a reduction in the price of oil if Iran continues with its nuclear weapons program. Turki, a former ambassador to the U.S. and Great Britain, presently has no official position in the Saudi administration. However, he often has been used to publicly float a policy change that later becomes reality. In making this announcement, he used the terminology to "squeeze Iran."
The strategic petroleum reserve, established after the 1973-74 Saudi Arabian oil embargo, contains 700 million barrels. The average price paid for oil in the SPR is $29.76 per barrel per the Department of Energy web site statistics at: http://fossil.energy.gov/
Further Reading - U.S. Strategic Petroleum Reserve: What's The Trigger Release?
About the Author - Bob van der Valk is a Petroleum Industry Analyst with over 50 years of experience, and has been quoted by the news media and government entities. You may reach Bob at tridemoil@aol.com.
The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.
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