Bingaman, a Silver City Democrat, says "There is reason to be concerned that the situation in Libya and throughout the region could become worse before it improves. I don’t know that it’s useful to try to predict the most likely outcome, but the reality is that many of the potential scenarios are not good for the stability of world oil flows."
Here's his argument for using the reserves, from a statement he put out just now.
From an oil market perspective, the turmoil in the Middle East changed course just over a week ago when Libya joined the group of countries that are witnessing historic popular uprisings. It is the first major energy exporter in the region to experience such an uprising.
At the moment, as much as 1 million barrels per day of Libya’s total 1.8 million barrels per day of oil production is currently offline, with continued political turbulence threatening to take more oil offline before order is restored. It appears that international oil companies, which are responsible for over 40 percent of Libyan oil production, have removed their personnel from the country, leading to the shutdown of most fields operated by those international companies. For the moment, it appears that the Libyan national oil companies are mostly continuing to produce and export oil, although there might be some limited production losses in national oil company production as well.
There is reason to be concerned that the situation in Libya and throughout the region could become worse before it improves. I don’t know that it’s useful to try to predict the most likely outcome, but the reality is that many of the potential scenarios are not good for the stability of world oil flows.
Fortunately, Saudi Arabia is widely believed to have enough spare oil production capacity to offset any losses in Libyan oil production. The Saudis have already publicly committed to compensating for any Libyan shortfall, and very likely have already ramped up production to make good on this promise. However, the additional Saudi crude oil will not be of the same quality as the lost Libyan barrels, which are light and sweet. About three-quarters of Libyan exports go to Western Europe, whose refineries cannot manage the heavier and sour crudes that come out of the Persian Gulf region. There will be some crude oil dislocation, as higher quality crudes are re-routed to Europe, and incremental Saudi barrels head for refineries that can handle the lower grade oil.
Between the lost production in Libya, the crude oil dislocation associated with additional Saudi production, and the prospect of further turmoil in the region, we are now unquestionably facing a physical oil supply disruption that is at risk of getting worse before is gets better. For this reason, I believe that it would be appropriate for the President to be ready to consider a release of oil from our Strategic Petroleum Reserve (SPR) if the situation in the Libya deteriorates further. Any additional oil market disturbance – such as turmoil spreading from Libya to Algeria, or from Bahrain to Saudi Arabia – would clearly put us into a situation where there would be a very strong argument in favor of an SPR sale. While I do not think that high oil prices alone are a sufficient justification for tapping the SPR, I do believe that the announcement of an SPR sale would help to moderate escalating prices.
My recommendation that we stand ready to release oil from the SPR is squarely in the traditional policy for SPR use, going back to the Reagan Administration. In testimony before the Committee on Energy and Natural Resources on January 30, 1984, President Reagan’s Secretary of Energy, Donald Hodel, stated that the Administration’s SPR policy in the event of an oil supply disruption was to ‘go for an early and immediate drawdown.’ The SPR would be used to send a strong signal to oil markets that the U.S. would not allow a physical oil shortage to develop.