France is the latest nation to contemplate tapping its strategic petroleum reserves, thus raising the possibility that a joint release of oil with the United States and United Kingdom could curb rising oil prices.
"It is the United States which has asked, and France has welcomed favorably this hypothesis," French Energy Minister Eric Besson said Wednesday. Such a move, if implemented, could happen in a “matter of weeks” French daily Le Monde reports. "The use of strategic reserves can be justified because it is related to geopolitical tension."
The move had immediate political overtones, with a French presidential election a month away.
Although President Sarkozy has enjoyed a small bounce in the polls after recent home-grown terrorist attacks, he still trails his main rival, Francois Holland. In the face of meager economic growth, consumer discontent over rising gasoline prices is rising. Prices have hit record levels with motorists in Paris paying $5.54 a gallon, according to CNN.
Earlier this month, President Obama and U.K. Prime Minister David Cameron discussed releasing oil from their strategic reserves to curb rising gasoline prices. Mr. Obama faces reelection later this year.
Any action will come only after the conclusion of tripartite talks with the International Energy Agency (IEA), which coordinates releases of emergency oil reserves. “France is accompanying the US and UK in the IEA consultation, which could allow the release of strategic oil reserves in order to break the rising price spiral,” Bloomberg quoted French Budget Minister Valerie Pecresse as saying.
For its part, the IEA has indicated there is no need to release oil stocks.
"There is no fear of disruption of supplies, and you know Saudi Arabia is going to bring more oil to the market," IEA Head Maria van der Hoeven said during a conference in New Delhi earlier this month, Reuters reports.
Speculation about a release of oil stocks pushed crude prices down Wednesday. In New York, crude futures fell $1.98 to $105.35 per barrel. In London, Brent crude prices dropped $1.67 to $123.87, still up about 16 percent since the beginning of the year.
But there's broad skepticism that a release of oil reserves will do much to dent oil prices in the long term. A recent Reuters study estimated that the world oil demand may be outstripping supply by more than a million barrels a day, caused primarily by the fall in oil sales from Iran, which is being pressured by the West to halt its nuclear program. All that a release of strategic reserves might accomplish, even a coordinated one by the US, UK, and France, would be a short-term dip in oil prices.
"It's looking more and more like they are going to go ahead and do it," Carl Larry, of analysis from Oil Outlooks and Opinions, told NASDAQ magazine. Even if the US, UK, and France release their strategic reserves and prices fall toward $100 a barrel, Mr. Larry was skeptical that the release would have long-term effects.