France and the U.K are in talks with the U.S. on a possible sale of crude oil from the nations' strategic oil reserves in response to rising gasoline prices, reports said Wednesday. The talks contributed to a decline in the price of crude oil.
Britain agreed to participate in the release of oil reserves earlier in March, Reuters reported, but as France approaches a presidential election in four weeks and gasoline prices rise there, the French government has begun to consider a request from Washington that it join in a release of strategic oil. Such an action could take place in a matter of weeks, according to unnamed French presidential sources cited by French newspaper Le Monde.
Some have warned that selling strategic reserves of crude will not lower retail gasoline prices The House Subcommittee on Energy and Power was set to hold a hearing on Wednesday to discuss the possibility of requiring increased U.S. drilling on federal land and in offshore locations if oil is released from the strategic reserve.
One such gimmick involves tapping the Strategic Petroleum Reserve to reduce prices ... However, the 'SPR' is a stockpile of oil previously set aside for an emergency, such as a major disruption of supplies from the Middle-East. Past attempts to use it in a non-emergency to bring down gas prices have never worked very well or for very long. Their only real consequence was to reduce the amount of oil on hand in case a true crisis arises, House Energy and Power Subcommittee Chairman Ed Whitfield said in an opening statement.
The move has also met resistance from the International Energy Agency (IEA), which coordinates strategic oil releases by 28 industrialized countries, including the U.S., France and Britain, according to Reuters. The IEA has only authorized three releases since it was established in 1974. The head of the IEA, Maria van der Hoeven, has said repeatedly that a release of strategic oil supplies is not warranted, and Germany and Italy have also stated their opposition to the plan.
IEA member nations have the right unilateraly to sell strategic reserves of crude oil.
Global oil supply shortages, though, are over a million barrels a day, though, according to a Reuters survey, a situation that could help to justify a release of strategic oil by the three nations.
The possibility of a release of crude oil reserves drove the price of Brent crude down Wednesday, with the spot price falling 1.08 percent to $124.64, according to Bloomberg.