Will oil rescue prevent high gas prices?

The US and the UK are reportedly teaming up in an effort to ease prices at the pump.

By Wall St. Cheat Sheet Mar 15, 2012 4:52PM

Image: Gas station © Purestock/Purestock/Getty ImagesThe United States and Britain agreed Thursday to release emergency oil reserves in an effort to prevent high gasoline prices from further crippling the economy, Reuters reported.

A formal U.S. request asking the United Kingdom to release oil from government-controlled reserves is expected shortly, the news service reported, citing sources. The request would follow a meeting Wednesday in Washington between President Barack Obama and Prime Minister David Cameron, who reportedly discussed the issue.

But will the oil release do any good?

Oil prices (USO) have remained elevated this year. After dipping to $96 per barrel in early February, light sweet crude rebounded to as high as $110 in March. Meanwhile, brent crude climbed above $127 per barrel. On Thursday, the average price for a gallon of gas at the pump was $3.82 -- 31 cents higher than a month ago.

Hear more about America's dependence on on foreign oil in the following video.

Post continues below.

After initially falling on the reserve-release news, major oil players such as ConocoPhillips (COP), Chevron (CVX), ExxonMobil (XOM) and BP (BP) pared losses after U.S. officials and White House sources called the reserves report inaccurate. Some analysts have speculated in recent weeks that oil reserves would be released due to high prices at the pump and the usual election-year politics. However, as the chart below from The Big Picture shows, a slight increase in crude supplies from strategic reserves generally fails to stem longer-term price rises in oil.

The previous announcement to release inventories from the Strategic Petroleum Reserve came last year on June 24. The release totaled 60 million barrels globally and half of that came from the U.S. At the time of the announcement, oil traded at $91 per barrel. Oil increased to above $97 until the actual release of the reserves on July 15. Even with the added oil supply, oil prices only fell to $88 per barrel by the time the emergency release was completed. Since then, oil prices have found a firm footing above $100 per barrel.

According to the U.S. Energy Information Administration, the U.S. consumes about 19 million barrels of crude oil a day. A 30 million-barrel release was not even enough to cover our energy needs for two days. World oil consumption is around 85 million barrels per day, meaning the previous total emergency release of 60 million barrels was not enough to cover just one day of world consumption. Like before, another release from the Strategic Petroleum Reserve is not likely to have a large or long-lasting impact on crude prices.

Related Articles

Is Google Still Searching for the Winning Formula?

Current-Account Deficit Explodes to 3-Year Record

Gold and Silver Dividends Are Getting Physical

Eric McWhinnie is an editor at Wall St. Cheat Sheet. As of this writing, he did not own a position in any of the aforementioned stocks.


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116 rated 1
274 rated 2
447 rated 3
698 rated 4
633 rated 5
652 rated 6
650 rated 7
491 rated 8
268 rated 9
125 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.