Geithner: We can tap oil reserves if we need them

WASHINGTON (CNNMoney.com) -- Treasury Secretary Tim Geithner told lawmakers Thursday that the U.S. and other nations are prepared to tap back-up oil reserves if Libya unrest continues and severely disrupts oil supplies.

Libya is the first oil exporting nation to be engulfed in the political upheaval spreading across North Africa and the Middle East, and investors have been worried that chaos in the region will drive crude prices even higher.

Price spikes have followed increasingly violent protests in Libya that have claimed more than 1,000 lives, according to the United Nations. Libya's ambassador to the United States has estimated the death toll at 2,000.

Geithner said Treasury is monitoring oil prices and a potential supply disruption and is prepared to act.

"It's important to note that there is considerable spare oil production capacity globally, and we and other major economies possess substantial strategic reserves of oil," he said in prepared remarks. "If necessary, those reserves could be mobilized to help mitigate the effect of a severe, sustained supply disruption."

The Treasury secretary reassured lawmakers that underlying inflation remains low nationwide. And he said the U.S. has "considerable spare oil production capacity" it could consider tapping in the event of a "major" supply disruption.

When asked how long Americans can expect prolonged oil price hikes and whether longer-term hikes would slow economic growth, Geithner said that was "not something we can know for certain today."

"Most investors regard this as a temporary increase and expect prices to come down gradually over the rest of this year," he said. "That would give us more confidence, if that was right, that it will have modest effects on growth and inflation."

Geithner also talked about U.S. sanctions against Libya. He said that federal officials have frozen $32 billion in assets under U.S. control, up from $30 billion last week. It's the largest amount of frozen assets of any U.S. sanctions programs so far.