President Bill Clinton has authorised the release of 30 million barrels of oil from the US strategic reserves in order to bring down prices.
The oil will be released from America's 571-million-barrel emergency reserve over a 30-day period and could be in the hands of oil companies as early as 9 October.
But oil companies will have to replace the oil next year, with a bonus percentage, once markets are less tight.
Republican presidential candidate George W Bush has condemned the move as a political ploy designed to boost the popularity of his Democrat rival, Vice-President Al Gore.
The decision follows calls from Mr Gore for some of the reserve to be put on the market, to stabilise rising prices ahead of the onset of winter.
The last time oil reserves were used was in the Gulf War
Announcing the move, US Energy Secretary Bill Richardson denied that it was political.
He said its purpose was "not to influence prices", but to address growing concern about low oil inventories and inadequate stockpiles of heating oil, especially in the US north-east.
"We need to make sure that American families are warm this winter," Mr Richardson said. "This is the right time to do this."
Mr Bush described the decision as a "bad idea", saying the reserve fuel was intended for a time of war or disruption.
"I believe that the vice-president has made this decision with the president's support to achieve short-term political gain," he told reporters.
The Energy Department will ask for bids on Monday, and oil companies will have to submit their bids by Friday. Awards of the crude oil will be made on 2 October following negotiations with the highest bidders.
Mr Richardson said that the government would at the same time be continuing discussions with international oil producers to bring down the price of oil which has been hitting record highs in recent weeks.
Mr Richardson said oil supplies nationwide were 19% lower than a year ago. In New England, he said, the figure was closer to 65%.
The emergency oil will come from three of the four sites where
Strategic Petroleum Reserve oil is stored in underground
caverns. The sites are Bryan Mound and Bayou Choctaw, which
each hold sour or high-sulphur crude, and West Hackberry, which
stores sweet crude which is easier to refine.
The US Strategic Petroleum Reserve
Set up in 1975 in response to oil price rises
To be released during an emergency shortage
Contains 571m barrels, but can hold up to 1bn
Located in Louisiana and Texas
Used only once, during the 1991 Gulf War
Can replace about 2 months of imports
Bryan Mound and West Hackberry are each capable of
delivering more than 30 million barrels in a month, the Energy Department said
Bayou Choctaw can deliver about 15 million barrels per month.
The Strategic Petroleum Reserve was created in 1973 following the Arab oil embargo.
US reserves hold enough oil to last the country about 60 days.
The United States has become increasingly dependent on imports
since the early 1990s, and the energy department estimates that by 2010 the country will rely on imported oil for almost 70% of its