News out of the Obama/Cameron meetings is that the US and Britain have agreed to release some of their oil reserves to drive down prices. Also, Japan and other countries may make similar releases of their reserves.
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, one source said.
Britain would respond positively, the two sources said.
Details of the timing, volume and duration of a new emergency drawdown have yet to be settled but a detailed agreement is expected by the summer, one of the sources said.
Other countries may also be approached by Washington to contribute, a further source said, Japan among them.
Releasing oil from the SPR (Strategic Petroleum Reserve) have often been controversial. The SPR was established by the Energy Policy and Conservation Act (EPCA) on December 22, 1975. It was constructed by and filling began under President Carter primarily provide a reserve of oil to be available in cases of supply disruptions. Since then, it has been tapped numerous times, mostly to counteract high prices and usually in concert with the International Energy Agency. Domestically, some have criticized those releases as being inconsistent with the purposes for which the SPR was established.
This is the text of the 42 USC 6241, the section of the law authorizing releases from the SPR.
(d) Presidential finding prerequisite to drawdown and sale
(1) Drawdown and sale of petroleum products from the Strategic Petroleum Reserve may not be made unless the President has found drawdown and sale are required by a severe energy supply interruption or by obligations of the United States under the international energy program.
(2) For purposes of this section, in addition to the circumstances set forth in section 6202 (8) of this title, a severe energy supply interruption shall be deemed to exist if the President determines that—
(A) an emergency situation exists and there is a significant reduction in supply which is of significant scope and duration;
(B) a severe increase in the price of petroleum products has resulted from such emergency situation; and
(C) such price increase is likely to cause a major adverse impact on the national economy.
Criticisms of SPR releases miss a fundamental point. This has never really been about supply as much as it has been about price. Whenever a disruption occurs prices rise. The measure of the seriousness of the disruption is the amount by which prices increase. It may sound circular, but it is reality.
There will never be a total disruption of oil supplies to the US. Most of our imported oil comes from Canada and other Western Hemisphere counties. At most we may experience supply disruptions from one or more sources. When those disruptions occur it will have less impact on the availability of crude in the US than it has on the price we have to pay for crude from other sources.
When prices are driven up by threats of war or market manipulators those increases are just as real and just as much a threat to our country as when supplies are completely cut off. Well, that's what's happening now. Three things are causing price increases today. There has been a complete cut off of oil from Sudan, a constant drum beat for war with Iran, and the market manipulations of oil speculators. These three things are working in concert to drive up oil prices. We need to address these sources of instability, but in the meantime we must put some counter force on the markets to lower prices.
Now we know the oil companies won't like it because high prices mean higher profits. But I'll let someone else shed a tear for those folks. In any event, my guess is that the threat of these releases will have the desired effect and actual releases may not occur.
It is also a pleasure to see that we have a President who can work with other countries to achieve things that are in our national interest, not by swagger and threats, but by persuasion and cooperation.
(It is noteworthy primarily as a bit of information for Sarah Palin that the President has not been talking with Queen Elizabeth about these matters, as she is home in Buckingham Palace doing whatever figurehead queens do. No, he is talking with Prime Minister David Cameron, who is the head of the British government.)