Letter to Barack Obama, President of the United States - Signalling Our Potential to Use Oil from the Strategic Petroleum Reserve

Letter

Today Maryland Congressman Chris Van Hollen sent a letter to President Barack Obama asking that the United States publicly declare our determination to deploy oil from the Strategic Petroleum Reserve to counter any significant supply disruption from the Persian Gulf in the wake of Tuesday's test-firing of medium-range missiles by Iran. The text of the letter is below:

July 5, 2012

President Barack Obama
The White House
1600 Pennsylvania Avenue, NW
Washington, D.C. 20500

Dear Mr. President:

I am writing to urge you to send an unambiguous signal to Iran that we will not allow their aggressive actions and belligerent statements -- coupled with an effective U.S.-European oil embargo -- to drive up the price of oil and negatively impact our economy. In my judgment, that signal should include an explicit declaration that we are prepared to use our Strategic Petroleum Reserve (SPR) to offset any significant supply disruption from the Persian Gulf.

As you know, yesterday Iran test-fired several ballistic missiles, including some that could strike Israel or U.S. bases in the region. These actions, coupled with Iranian threats to close the Strait of Hormuz, have already contributed to a spike in crude oil prices.

On July 1, 2012, the European Union joined the United States in imposing an embargo on the purchase of Iranian oil. This important action, which is part of a coordinated effort to put economic pressure on Iran to end its nuclear program, will likely result in a relative shortage of supply as Iranian oil is impeded from coming to market. This shortage will be accompanied by uncertainty surrounding the ongoing talks regarding the Iranian nuclear program and perceptions about the threat of conflict should those talks fail.

The Iranians know they can exploit this uncertainty by taking actions -- like their recent missile test -- to further roil the oil markets and weaken already fragile Western economies. We can deprive the Iranians of using the price of oil as a political weapon by making clear that we are prepared to counter Iranian action with releases from the SPR. That American action will also send a clear message to the international oil markets that we will not allow oil shortages caused by an effective embargo of Iran to weaken our economies or our resolve. Such a step would also preempt a rise in oil prices based on fears and speculation about any conflict in the Gulf.

The Strategic Petroleum Reserve was established following the 1973 Arab-Israeli war in response to the oil embargo initiated by the Organization of Arab Petroleum Exporting Countries (OAPEC). It is designed to protect our economy from disruptions in oil supply and efforts to use oil price hikes as a political weapon. As you know, under the authorities provided in P.L. 101- 383, a limited drawdown over 60 days may be initiated in the event of a circumstance that "constitutes, or is likely to become, a domestic or international supply shortage of significant scope or duration" and where "action taken would assist directly or significantly in preventing the adverse impact of such a shortage." There is no doubt that an effective embargo of Iranian oil, coupled with ongoing threats from Iran, could result in an international supply shortage, and that the release of oil from the SPR could assist directly or significantly prevent the adverse economic impacts of such a shortage.

Therefore, to send a clear signal to Iran and the international oil markets, and to prevent economic damage here at home, I urge you to publicly declare our determination to deploy our Strategic Petroleum Reserve to counter any significant supply disruption from the Persian Gulf.

Sincerely,

Chris Van Hollen

Member of Congress

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