One of the most pragmatic leaders on energy policy in the Senate last night said the United States should consider selling off some of its crude oil reserves to offset soaring oil prices and potential supply disruptions that could result from political turmoil in the Middle East.
Sen. Jeff Bingaman (D-N.M.), chairman of the Energy and Natural Resources Committee who is retiring at the end of this Congress, called on President Obama to stand ready to release crude from the nation's 727-million barrel Strategic Petroleum Reserve (SPR) if the unrest in Libya and North Africa worsens.
"Between the lost production in Libya, the crude oil dislocation associated with additional Saudi production, and the prospect of further turmoil in the region, we are now unquestionably facing a physical oil supply disruption that is at risk of getting worse before is gets better," Bingaman said yesterday on the Senate floor.
"For this reason, I believe that it would be appropriate for the president to be ready to consider a release of oil from our Strategic Petroleum Reserve if the situation in Libya deteriorates further," he added. "Any additional oil market disturbance -- such as turmoil spreading from Libya to Algeria, or from Bahrain to Saudi Arabia -- would clearly put us into a situation where there would be a very strong argument in favor of an SPR sale."
Crude oil prices are currently hovering above $100 dollars a barrel as unrest in Libya, the world's 17th-largest producer, has spooked financial markets.
Bingaman said the motivation for a sale should not be based on the soaring oil prices alone, although he conceded such a move would likely ease market tension.
"While I do not think that high oil prices alone are a sufficient justification for tapping the SPR, I do believe that the announcement of an SPR sale would help to moderate escalating prices."
Bingaman is not the first Democrat to propose an SPR sale to offset the current situation. Last week, a group of House Democrats led by Rep. Ed Markey of Massachusetts called on Obama to consider tapping the stockpile.
But the Obama administration does not appear willing to dip into the reserves just yet.
Energy Secretary Steven Chu told reporters yesterday morning that there is plenty of spare capacity around the world to rein in oil prices without tapping the SPR.
He said a decision to tap the stockpile would ultimately be up to the president, but he added that the Energy Department was watching the situation in the Middle East and its impact on oil supplies and prices "very closely."
"Because we have spare capacity, we expect naturally the market forces will take care of this, but we are concerned and we will watch it very carefully," Chu told reporters after a hearing in the Senate Budget Committee on his agency's fiscal 2012 spending request. "But we're hoping that market forces will take care of it."
Chu left a little wiggle room, though, saying, "If need be, we'll take whatever action is needed given all these factors."