HANOVER, New Hampshire (Reuters) - U.S. Treasury Secretary Timothy Geithner defended the decision by industrialized nations to release emergency oil reserves into global energy markets, saying on Friday that it was not a political move.
“It’s really as simple as this: there’s a war in Libya, costs between one and two million barrels a day in lost output, I think 140 million barrels off the market so far,” he said in response to a question at Dartmouth College, where he spoke on a panel.
“Reserves exist to help mitigate those kinds of disruptions and we helped to organize a coordinated global international response to help ease some of that pressure,” he added.
The Paris-based International Energy Agency announced on Thursday that it was tapping member countries’ emergency reserves -- some 60 million barrels over 30 days -- for only the third time since it was founded in 1974, to fill the gap in supplies left by the disruption to Libya’s output.
The 28-nation IEA, which was set up after the Arab oil embargo as a counterweight to OPEC, said the move was a bid to boost the global economic recovery by holding down oil prices.
The United States will provide half of the total volume to be released.
The decision caught energy and financial markets by surprise and generated criticism from oil companies, members of the OPEC oil-producing cartel and Republican opponents of the Obama administration.
Since oil prices already had fallen from early-May peaks near $115 a barrel, critics said the action appeared aimed at propping up President Barack Obama’s popularity rating as much as helping consumers.
But Geithner, who met with local business leaders earlier on Friday in nearby Manchester before speaking at Dartmouth, said putting additional oil supplies on market was “sensible policy” that should give a lift to a slowly expanding economy.
“It will provide some modest help and relief” to the U.S. economy, Geithner told reporters afterward. “It was a prudent use of existing reserves.”
High oil prices have put “significant” pressure on global growth, he said.
Geithner has limited his foreign travel this year, concentrating on trying to build support in Washington for a hike in the debt ceiling before August 2 when Treasury said the country will be at risk of default. But he has made several day trips to different regions, like Friday’s to New Hampshire, urging business groups to tell Republican lawmakers that concluding a budget and debt deal is urgent.
In his remarks at Dartmouth, Geithner said many factors restraining U.S. economic expansion were temporary, including supply-chain disruptions from Japan’s massive earthquake in March. He also said an adjustment in housing markets was about two-thirds over.
He said costlier energy and less vigorous worldwide growth would keep U.S. economic growth to around a 2 percent annual rate in the first half this year, but he insisted that underlying trends were improving.
Regarding budget talks in Washington, Geithner said he was confident Congress can still reach a deal, even after a top Republican lawmaker walked out of the talks this week. But he said tax increases cannot be taken out of the equation.
“You need to have modest changes in revenue,” Geithner said. “There is no way to do a deal without it.” ID:nN1E75N0OS]
He said that business leaders whom he met with on Friday had some encouraging words about the environment they face.
“Things are gradually getting better,” Geithner said, adding that the U.S. economy is still growing “a little slower” than had been expected.
U.S. economic growth in the first quarter was an annualized 1.9 percent, the Commerce Department said on Friday.
That was revised up from a previous 1.8 percent reading. But it is still too low to be an engine for job creation, with the high U.S. unemployment rate of 9.1 percent posing a reelection challenge for Obama.
The budget deal “needs to get done in a way that doesn’t put too much pressure on the economy near term,” said Geithner, calling for “the right kind of balance” and a deal that does not skew too much to elements that could hinder growth.
Business people badly want to see Washington reach a broad agreement on the budget, and soon, Geithner added. “A lot of people think that would be good for the economy, and I agree.”
Additional reporting by Ros Krasny in Manchester, Rachelle Younglai and David Lawder in Washington; writing by Glenn Somerville; editing by Leslie Adler
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