The International Energy Agency defended its decision to put emergency reserves up for sale on the markets, arguing the halt to Libyan oil production was more detrimental than the disruption in the Gulf caused by Hurricane Katrina in 2005.
The sharp sell-off of oil stocks and a drop in futures sales yestreday appeared to stabilize today as the markets adjusted to the surprise announcement to release 60 billion barrels of oil, half of which will come from the U.S. Strategic Petroleum Reserve.
Richard Jones, the deputy chief of the IEA, told Reuters Insider TV that the loss of 1.5 million barrels a day of oil because of the revolution in Libya comes now at a bad time as refineries go on line for summer production.
"Now we're going into the summer driving season, those refineries which have returned to operation are about to ramp up their production," Jones said.
Skeptics and political detractors, however, accuse the Obama administration of dumping the oil to offset the sticker shock caused by $4 a gallon gasoline at the pumps as motorists face the summer vacation road season.
"The (Strategic Petrolium Reserve) was created to mitigate sudden supply disruptions," said House Speaker John Boehner (R-Ohio). "This action threatens our ability to respond to a genuine national security crisis and means we must ultimately find the resources to replenish the reserve – at significant cost to taxpayers."
While U.S. gas prices are forecast to dip at least 20 cents on average, Jones suggested there was no pressure from the Obama administration to release the oil. "All 28 countries were approached with the plan and not one country opposed it," he told Reuters TV.
On another front, the Federal Trade Commission this week announced it will investigate whether U.S. refineries are responsible for the price hikes at the pump the past few months.