World oil prices fall after US move

World oil prices have tumbled after the US announced the release of 30 million barrels of oil from its emergency stockpile.

World oil prices have tumbled after the US announced the release of 30 million barrels of oil from its emergency stockpile.

Prices fell to $30.32 a barrel, after hitting a 10-year high of $37.80 a barrel just a week ago.

It is the first time the stockpile has been used for an emergency since the Gulf War in 1991.

The White House announcement came 24 hours after Democratic presidential candidate Al Gore urged the release of some oil, leading to Republican accusations that the move was politically motivated.

Under the plan, the 30 million barrels will be loaned to energy companies, which will sell the crude in the open market or refine it into petroleum products like heating oil.

The companies must promise to return the oil, plus more barrels, to restock the reserve next year when prices are lower.

The European Union also acted in response, with Commission President Romano Prodi discussing the issue of member states' strategic oil reserves with senior executives from a number of major oil companies.

The Commission will now draw up a paper on a "comprehensive" approach on policies in the energy sector to be discussed by finance ministers.

The Clinton administration said oil taken from reserves must be returned by November next year.

The Energy Department issued a formal solicitation for bids from energy companies to take the reserve oil. Bids are due by Friday.

After a week of analysing the offers, the winners will be announced on October 6.

While deliveries of the oil could start as early as Monday, October 9, the department expects to ship most of the oil during November.

Companies must promise to restock the stockpile with the borrowed crude, plus additional barrels of oil, between August and November 2001 when oil prices are expected to be lower.

The companies must state in their bids the amount of additional oil they would repay to the stockpile. The oil will likely be awarded to firms that agree to supply the most extra barrels, according to the Department.

Oil-consuming nations around the world breathed a sigh of relief at the drop in prices.

At the weekend meeting of the International Monetary Fund in Prague, some policymakers expressed concern that expensive oil could boost inflation and curb world economic growth in the United States, Japan and Europe.

The US action was expected to be discussed by OPEC ministers at a special meeting of the cartel in Caracas on Wednesday and Thursday. The session has been billed as a 40th anniversary celebration of the cartel.

Gore has again defended the release of oil reserves ahead of the November election, saying he would not go along with the "apologists" for big oil firms.

In an interview with NBC's "Today" show, Gore said the administration would not "sit around and do nothing" while consumers were being charged "outrageously high" oil prices.

Asked whether he was referring to his Republican opponent George W. Bush, Gore responded: "I'm not using any names, all I'm looking at is the proposals that have come from the oil companies. It's true that the big oil companies are supporting my opponent."

Bush's running mate, Dick Cheney, accused Gore of doing an about-face on energy policy "to score political points" with election day six weeks away.

Some oil industry analysts cautioned that even with the injection of new US oil supplies into the market, the world is still vulnerable to price spikes.

Geoff Pyne, an oil consultant with Britain's Standard Bank, warned: "If Iraq decides to play tricks, the world does not have enough spare capacity to avoid a short-term shock."