The Obama administration decision to release crude oil supplies from the Strategic Petroleum Reserve (SPR) in coordination with the International Energy Agency (IEA) may help Europeans more than U.S. consumers.

That’s because the U.S. has huge reserves of low-sulfur crude needed to make fuels that meet strict European standards. European refineries’ normal source is Libya.

In the U.S., the release probably won’t do much to lower prices, but some experts say it could keep prices from rebounding to the levels we saw this spring – both the release itself, and beyond that, the perceived willingness of consumer nation governments to release more stocks if world market prices start to soar.

The danger? Reserves are healthy, some 1.6 billion barrels in governments’ control alone, 727 million of that in U.S. hands. But compared to world consumption running between 80 and 90 million barrels a day (20% of that in the U.S.), they’re a drop in the bucket, and production disruptions in supplier countries could still send prices soaring.

The Libyan civil war has cut off supplies of very low sulfur crude to European refineries. Saudi Arabia has spare oil, but none that's as low sulfur as Libya's. The SPR, according to the Congressional Research Service, is sitting on about 293 million barrels of that coveted "light, sweet crude."

J.P. Morgan analysts say they expect the U.S. releases to include more of the sweet crude that Europe needs, and U.S. refineries don't. That would help avert any shortages for European transportation fuels.

The IEA’s June 23 announcement that major oil consuming nations will release 60 million barrels in the next 30 days, half of it from U.S. reserves, sent oil futures tumbling in London and in New York. The U.S. benchmark crude dropped briefly below $90 a barrel for the first time since February.

Recent Commodity Futures Trading Commission reports show many traders have been betting that oil prices would rise again in the coming months, though the latest report shows traders shifting those bets to a downward price trend just in the last two weeks. The CFTC is looking into possible insider trading.

But most analysts were puzzled at the timing of the decision. Oil prices worldwide have been coming off highs hit after the Libyan civil war began. As recently as two weeks ago, Saudi Arabian officials insisted the world was well supplied with oil but promised, along with Kuwait and the UAE, to increase pumping of a lower-sulfur “blend” to help Europe.

U.S. gasoline prices have been declining for a month, and with the Federal Reserve cutting its economic forecast yesterday, were expected to keep dropping, though the world is still on track to consume record amounts of oil in 2011.

So why did the IEA make its release decision now? The IEA says analysts believe the Libyan situation will keep its crude out of the market for the rest of the year. European and U.S. refineries are exiting spring maintenance outages and gearing up to produce summer driving fuels and replenish depleted refined product stocks, and need crude now, the IEA said. Saudi Arabia can't gear up production fast enough in the next 30 days, the IEA said, asserting the reserve releases will "bridge the gap."

But there’s still little effect for U.S. consumers. U.S. refineries have been running below capacity and domestic crude prices have been more than $20 cheaper than European crude because of a surplus at the major Midwestern pipeline terminal.

Charles Ebinger, director of the Brookings Institution's Energy Security Initiative, says it takes about 75 days for crude to move from release through refining and reach consumers. He called the decision "a political gambit that will not lower prices" in the U.S.

Elliott Gue, analyst and editor of the Energy Strategist (http://www.energystrategist.com/), agrees that the few reserve releases in the past have had, at best, only short-term impacts.

But he notes oil prices had appeared to touch bottom in the last few weeks despite negative economic news, and he said possibly both U.S. and EU leaders feared that prices might bounce upward again.

Gue adds another thought: the release shows the politicians really don’t believe their own claim that “speculators” are raising prices above what oil “should” cost. Rather, he said, the decision is “a tacit admission that the oil markets have tightened due to Libyan supply constraints and the inability of OPEC to fill the gap.” In other words, prices went up because there really was less oil available.

Neil Fleming, a London-based oil expert who has directed oil market coverage at ICIS and Platts, said the move also covers over the question of whether Saudi Arabia can gear up spare capacity to end-run its OPEC compatriots, Venezuela and Iran. At OPEC’s latest, and messy, meeting, those nations blocked any increase in OPEC production to compensate for Libya, leading to the three Gulf nations’ promise to increase output on their own.

Fleming warns that if the Greek crisis is sorted out and the euro stabilized, oil prices will again tend upward as the dollar loses relative value.

Gue cautions that the oil supply situation is tighter than many people think. The reserve releases could give a bit of breathing room this summer, but the long-term outlook is still for rising prices – constrained supply in the face of rising consumer demand – fundamentals that will challenge economies and governments everywhere.