Here’s How Britain and the U.S. Intend to Save Us From Rising Oil Prices
Britain is poised to coordinate with the United States in a release of strategic oil stocks from government-controlled reserves within months, according to two British sources. The U.K. is expecting a formal request for cooperation from the U.S. “shortly” following a meeting on Wednesday in Washington between President Barack Obama and Prime Minister David Cameron, one source told Reuters.
Cameron said a release was worth considering when meeting with students in New York. “We didn’t make any decision, this has to be discussed broadly. We’ve got to look at this issue carefully, it’s something worth looking at. Short-term should we look at reserves? Yes, we should,” Cameron said. “We’d both like to see global oil prices at a lower level than they are.”
A detailed agreement is expected by summer, one of the sources said, but so far the timing, volume, and duration of an emergency drawdown have yet to be settled. Whether other countries might participate also remains unknown. Another source said Japan might be considering similar measures to prevent high fuel prices from choking economic growth.
White House spokesman Jay Carney confirmed that Obama and Cameron discussed rising oil prices, but declined on comment on whether they discussed a release of reserves.
Gas prices have risen sharply in the U.S., threatening to stall the economic recovery. Brent crude prices are up more than 15 percent since January to a peak of over $128 a barrel. U.S. crude has been flirting with $106 for weeks.
Previous emergency oil releases have been coordinated by the International Energy Agency, but the IEA has declined to take the lead this time around. The IEA did say that countries may legitimately decide to release oil unilaterally. Top U.S. officials, including Energy Secretary Steven Chu and Treasury Secretary Timothy Geithner, have said publicly in recent weeks that a U.S. oil release is among the options the government is considering.
Though there are currently no significant disruptions of world oil supplies as of yet, sanctions on Iran are expected to cut its output when a European Union embargo takes effect in July. Minor stoppages in South Sudan, Yemen, and Syria have also contributed to the rise in oil prices.
“At the moment there is no need to use it,” IEA executive director Maria van der Hoeven said of the reserves at an industry conference in Kuwait this week. “There is more supply coming to the market from OPEC countries. There is no price trigger for the stocks release, the trigger is a disruption in physical supplies.”
Saudi Arabia, OPEC’s biggest and only producer with any spare capacity, has said it is prepared to fill a supply gap, but will only do so to meet additional demand, rather than as a preventative measure.
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