Seeking to cap summertime gas prices, the Obama administration said Thursday it will tap the country’s strategic oil stockpiles for a temporary boost.
In a coordinated action with foreign capitals, the U.S. will release 30 million barrels of oil onto the world market in the next month, and other countries that are partners in the International Energy Agency will release another 30 million barrels, Energy Secretary Steven Chu said.
Critics, though, said tapping the reserve — intended to cope with severe supply disruptions — is a poor substitute for boosting U.S. oil production, and called it a political move at a time when gas prices and a sluggish economy are pulling down President Obama’s approval ratings.
Although they have eased in recent weeks, gas prices at the pump remain so high that the IRS on Thursday announced an unusual mid-year bump in the rate taxpayers are allowed to claim as deductible driving costs for business purposes by 4.5 cents per mile, bringing it to 55.5 cents.
The coordinated move, which took traders by surprise, had an immediate impact of prices.
Oil prices tumbled 6 percent during the day to a four-month low. Brent crude futures for August plunged by more than $8 after the news, before settling at a four-month low of $107.26 a barrel, down $6.95 for the day.
Mr. Chu blamed the ongoing conflict in Libya for the loss of 1.5 million barrels a day of light sweet crude oil, and said the loss, coupled with disruptions from other oil-producing countries, is harming the overall global economic recovery. He also promised “additional steps if necessary.”
Tapping the Strategic Petroleum Reserve is a popular, though controversial, step, and there is debate about whether it has any effect on the price consumers pay at the pump.
The move comes as retail gasoline prices dropped for the 20th consecutive day, down a penny from Wednesday, to $3.61 per gallon, according to the AAA Daily Fuel Gauge Report. That’s about 21 cents lower than a month ago.
Rep. Ed Markey, Massachusetts Democrat, who has been calling for tapping the reserve, said it has a proven track record. According to his figures, when President George H.W. Bush tapped the reserve in 1991 it lowered prices 33.4 percent; when President Clinton released oil in 2000 it caused an 18.7 percent drop; and President George W. Bush’s move in 2005 led to a 9.1 percent cut in fuel costs.
“With our economy teetering on the brink of a double-dip recession, and American families still struggling during peak driving season, this is the one tool America has at her disposal to immediately help drive down prices at the pump,” said Mr. Markey, the ranking Democrat on the House Natural Resources Committee.
The reserve — in five underground storage facilities in Texas and Louisiana — was created by Congress to try to prevent a repeat of the supply disruption caused by the 1973-74 Arab oil embargo.
As of Thursday, it was at a historically high level of 727 million barrels.
The U.S. consumed 18.8 million barrels per day in 2009, according to the U.S. Energy Information Administration.
Republicans hinted that Mr. Obama was using the oil release “to achieve short-term political gain,” but said the fact that the president was taking the step was also an admission that he hasn’t done enough to increase the domestic supply of oil.
“This release will only cover a fraction of the oil production lost from the Gulf of Mexico due to the administration’s moratorium and permitting delays,” said Natural Resources Committee Chairman Doc Hastings, Washington Republican.