West plans to release emergency oil to halt rising petrol and energy prices

Paris-based International Energy Agency sanctions 60m barrels to counter shortages but Opec condemns 'political' intervention

This action is a desperate attempt to keep business-as-usual for a little while longer, somewhat equivalent to the massive bail-outs and quantitative easing we have been seeing in the US.  A radical idea - why not keep the strategic oil reserve for a real emergency - like when the pumps actually run dry?

This article is from today's Guardian

The west has fired a warning shot across the bows of Opec by releasing 60m barrels of "emergency" oil supplies on to the market in an attempt to halt soaring petrol and other energy costs damaging the global economy.

Crude prices slumped by $6 a barrel after the International Energy Agency, whose 28 members include Britain and America, unveiled plans to release 2m barrels a day for a month from its emergency reserves to counter shortages created by the conflict in Libya.

Delegates from Opec countries immediately accused the Paris-based IEA of "unjustified interference" in global energy markets and said the organisation was "playing politics" with oil.

The move, plus new signs of weakness in the world economy, saw early success, with the cost of Brent crude spinning down to $108 compared with a high of $127 in April.

Stock markets in London and New York, also fell sharply, with the FTSE 100 down 1.6% at 5683. The gloom was increased by signs that the American economic recovery is slowing amid continued uncertainty over the Greek debt crisis.

Paul Watters, a spokesman for the AA, which has campaigned for lower petrol prices as the cost of a litre has risen close to £1.50, said: "Although a dramatic fall in the price of oil throws a lifeline to drivers barely able to afford current pump prices, past experience makes it unlikely that they will see an equally dramatic drop in the price of fuel in the short-term."

It is only the third time in the 37-year history of the IEA that oil has been released in this way and follows repeated calls on Opec to turn on the taps and bring down the price of oil. The agency also acted after swings following the first Gulf war in 1990-91 and Hurricane Katrina in 2005.

The US has pledged to provide half the 60m barrels, reflecting frustration in western governments over high petrol and heating bills pushing up inflation and undermining global economic recovery.

Nobuo Tanaka, executive director of the IEA, who pleaded last weekend with Russia and Opec to act to curb prices, said that using the strategic reserves was meant to complement promises made by Saudi Arabia and other oil producing countries to meet shortages caused by the war in Libya. "I expect this action will contribute to well-supplied markets and to ensuring a soft landing for the world economy."Opec producers this month failed to reach agreement on increasing output, although Saudi Arabia, the single biggest exporter, later pledged to help out.

Saudi Arabia, a US ally, was expecting to win an increase in production quotas at the Opec summit in Vienna but faced combined opposition from tradional hawks such as Iran and Venezuela, along with new ones such as Iraq.

Some Opec delegates from Iran and two Gulf states said the IEA's release of emergency stocks was wrong. "I don't know how to justify this interference in the market," a delegate from Iran, which currently holds the Opec presidency, told the Reuters new agency on condition of anonymity. Opec delegates from Gulf which had backed the Saudi proposal for higher output, also took issue with the IEA's action. states said"The oil price hasn't shot up to $150. There is no reason to do this. The market is not short of supply. Kuwait and Saudi Arabia have been raising production, but there have not been many buyers. The IEA is just playing politics with the US," added one Gulf delegate.

Opec member Libya had been exporting about 1.2m barrels a day before the civil war brought the oil industry to a standstill, causing price increases in a market already heated due to higher than expected demand.

Total oil stocks in IEA member countries amount to over 4.1bn barrels. Nearly 1.6bn barrels of this are public stocks held exclusively for emergency purposes.

The IEA was established in the wake of the 1973 oil price crisis to represent the interests of oil consuming nations. But it has increasingly tried to forge closer links with producing nations and last weekend asked Russia to consider joining its ranks.

But while motorists in Britain have been facing record pump prices and household heating costs have risen because gas prices are tied to oil, Carl Larry at the Blue Ocean commodity brokerage in New York said crude values might not fall much further. "This is an economic stimulus ... in oil dollars," he said. "On the other hand I think we have confirmed the bottom of the oil market here at $109 for Brent."