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U.S., partners tap emergency oil reserves; Move aims to reduce strain on global economy, but experts question long-term price impact

The United States and other nations that depend on oil imports will release and sell 60 million barrels of crude from emergency stocks in an effort to ease the strain of high oil prices on the global economy.

The action by the International Energy Agency, a group of more than two dozen countries, covers only what the world uses roughly every 16 hours.

But it was enough to send oil prices lower -- approximately 5 percent -- at least for the moment.

In addition to helping the struggling economies of the United States and Europe, analysts said the surprise move was meant as a rebuke to the Organization of Petroleum Exporting Countries, which has refused to increase oil production to bring down prices.

It will be the largest sale of crude ever from world strategic reserves and only the third since the IEA was formed in 1974 after the Arab oil embargo. The IEA released oil in 2005 after Hurricane Katrina and in 1990 and 1991 after Iraq invaded Kuwait.

Half the oil will come from reserves in the United States. Refiners who turn crude into gasoline will be able to bid on the extra oil, to be shipped from the salt caverns along the Gulf Coast where it is stored.

The U.S. stocks, called the Strategic Petroleum Reserve, hold 727 million barrels.

The IEA said high oil demand and shortfalls of oil production caused by unrest in the Middle East and North Africa threatened to "undermine the fragile global economic recovery."

The uprising in Libya has taken1.5 million barrels of oil per day off the market -- a half million barrels less than the IEA will release each day.

The price of oil rose to nearly $114 per barrel at the end of April, the highest since the summer of 2008, but since then has fallen considerably. Analysts questioned how much relief the move would provide the economy -- and for how long.

Andrew Lipow, an analyst, said the timing of the announcement, a day after Federal Reserve Chairman Ben Bernanke delivered a negative outlook on the economy, suggests that industrialized countries are grasping for solutions. He said Americans should expect the price of gasoline to fall, but not dramatically, in coming weeks.

"Fifteen or 20 cents a gallon of relief is not enough to make people feel good about their job prospects or losses on the stock market or our general economic slowdown," he said.

The IEA and the White House said they were acting to increase the supply of oil available during the peak summer driving season.

"We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery," Energy Secretary Steven Chu said.

Gas prices already have fallen for 20 days in a row.

According to the AAA Daily Fuel Gauge Report, they were down another penny Wednesday, to a nationwide average of $3.61 per gallon -- about 21 cents lower than a month ago. The same report lists prices in Buffalo Niagara as averaging $3.87 per gallon.

Rep. Edward Markey, D-Mass., who has been calling on President Obama to release some of the reserves, hailed the announcement.

"With our economy teetering on the brink of a double-dip recession, and American families still struggling during peak driving season, this is the one tool America has at her disposal to immediately help drive down prices at the pump," said Markey, chairman of the Natural Resources Committee. "Deploying just a small fraction of our nation's oil reserves will have a huge effect on the everyday lives of American families and potentially on the health of our economy."

But the timing of the release prompted criticism from business groups and Republican lawmakers, who accused the president of playing politics with the country's oil reserves.

"The Strategic Petroleum Reserve was designed for energy emergencies, not political convenience," Rep. Fred Upton, R-Mich., chairman House Energy and Commerce Committee, said in a statement. "Releasing our reserves to calm the market is emblematic of an administration whose energy policy is irrational and counterproductive."

Upton renewed his call for opening more federal land to domestic drilling.

The news caught most oil experts by surprise.

"It was the best-kept secret," said Fadel Gheit, an oil analyst with Oppenheimer & Co. "Speculators must have lost their shirts." He said that the effect on oil prices would be "good for the consumer."

The amount of oil to be released, 2 million barrels per day, represents 2.2 percent of daily global oil demand.

The 60 million barrels to be released over the span of a month is less than one day's demand, about 89 million barrels.

The IEA left open the possibility that the program could continue after a month.

It acted two weeks after OPEC decided during a tense meeting not to increase oil production to meet rising demand.

Iran and Venezuela want production to remain stable in hopes of keeping prices -- and revenue -- high. Saudi Arabia wants to increase production, fearing that high oil prices will hurt the global economy and reduce oil demand over the long term.

The Washington Post contributed to this report.

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