Deputy White House Press Secretary Josh Earnest has confirmed the Obama administration is consideringtapping oil from the 727 million barrel Strategic Petroleum Reserve.
Taking oil from the SPR is a rare move.
As part of a coordinated global effort, reserves were released last year after Libya’s supply of oil went off-line during the civil war in that country. Reserves were also tapped in 2005 after Hurricane Katrina and in 1991 during the first Gulf War after Iraq invaded Kuwait. (Related: Brent Crude Ends Lower on Reserves Release Talk.)
As the administration debates the wisdom of such a move, the International Energy Agency has come out against taking oil from the SPR. The IEA’s Executive Director, Maria van der Hoeven, was quoted Friday saying “there is no reason for a release.” She also said the agency has not been in touch with the Obama administration about any kind of globally coordinated move.
Traders at the NYMEX were quick to accuse the administration of considering using the Strategic Petroleum Reserves for political gain rather than using it for its intended purpose, during an emergency.
"If Mr. Obama thinks his re-election effort is in an emergency, that’s probably enough to try to influence the price of oil any way he can,” said Ray Carbone, President of Paramount Options.
“It seems a bit premature to release reserves. We are still in the summer driving season and waiting until after Labor Day would give us a better indication on whether a release is necessary," he added. "The market is being influenced by worries over possible war between Israel and Iran but to release now, before a true emergency would expend the bullets available.”
The U.S. Department of Energy’s website says “the SPR provides the President with a powerful response option should a disruption in commercial oil supplies threaten the U.S. economy.” (Related: Tapping into SPR Could Drive Oil to New Highs: Gartman.)
Alan Harry, who trades oil at the NYMEX as the CEO of the Spartan Commodity Fund, said, “I think this is politics. In the past decade we have not used the SPR for anything but clear cut emergencies. Yes, crude oil’s on the high side but not as high as it was in the past, we saw $150 a barrel oil a few years ago.”
Harry said if there were to be a war in the Middle East, that would be a reason to release oil from the reserves, “but that hasn’t happened.”
According to AAA, the national average for gasoline prices right now is $3.71 a gallon. It’s unclear whether gasoline prices would fall much, if the Obama administration decides to take oil from the strategic reserves but the traders at the NYMEX say it would likely only have a moderate and short term impact.
—By CNBC's Jason Gewirtz