U.S. edges closer to using its Strategic Petroleum Reserve

News services are reporting that the U.S. is edging closer to tapping its Strategic Petroleum Reserve (SPR). In “Obama Considers Tapping Oil Reserve“, the NY Times reports:

“The Obama administration is considering tapping the Strategic Petroleum Reserve in response to rapidly rising gasoline prices brought on by turmoil in the Middle East, the White House chief of staff, William M. Daley, said on Sunday.”

While energy prices are excluded from core measures of inflation, fears are rising along with oil prices that the on-going fragile economic recovery could soon be stymied. The administration is understandably trying to proceed cautiously. For example Energy Secretary Steven Chu noted:

“We don’t want to be totally reactive so that when the price goes up, everybody panics, and when it goes back down, everybody goes back to sleep.”

Moreover, as the fighting in Libya grows worse, and the Gaddafi regime digs in its heels, the prospects grow for an extended civil war. Under such a scenario, the strategic oil reserve may prove inadequate for keeping a lid on oil prices. Supplies may not even be disrupted in a significant way, but the fears of larger disruptions could be enough to continue propelling prices higher.


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