US Congress urges White House to reconsider SPR fill policy

May 19, 2004
A bipartisan group of US lawmakers Tuesday urged the White House to temporarily stop filling the Strategic Petroleum Reserve until crude prices drop down from record highs.

Maureen Lorenzetti
Washington Editor

WASHINGTON, DC, May 19 -- A bipartisan group of US lawmakers Tuesday urged the White House to temporarily stop filling the Strategic Petroleum Reserve until crude prices drop down from record highs.

The US Department of Energy wants to fill the 700 million bbl capacity reserve by mid-2005 as part of the White House's homeland security efforts. To meet that target, DOE has pumped as much as 300,000 b/d into the SPR's salt caverns in Louisiana and Texas in recent months, nearly double last year's rate.

The summer inventory schedule will only average about 120,000 b/d, but DOE's past actions have led some lawmakers to argue that fast-filling the SPR is counterproductive because it discourages private inventory builds. They also argue that policymakers are sending a bad psychological signal to a market already spooked by terrorism concerns and higher-than expected global oil demand.

House reaction
US House Energy and Commerce Committee Chairman Joe Barton (R-Tex.) told reporters Tuesday that it made economic sense to wait for prices to drop before topping off the SPR. But he vehemently disagreed with Senate Democrats who want the White House to go one step further and sell oil to dampen prices.

Rep. Barton argued that selling SPR crude would not impact the market for long and would not do much, if anything, to alleviate today's higher gasoline prices. Barton's comments were similar in tone to remarks given to reporters by the presumptive Democratic presidential candidate Sen. John Kerry (D-Mass.) on the campaign trail in Oregon.

Former presidents George H.W. Bush and Bill Clinton both sold SPR oil during their administrations.

Meanwhile back on Capitol Hill, Sen. Pete Domenici (R-NM), chairman of the Energy and Natural Resources Committee, called the Senate Democrats' plan to sell reserve oil "one of the worst ideas I've heard this year." He argued that the market impact from a sale would be short-lived but the threat to US oil supply would be longer lasting.

"Today, we have 660 million bbl of oil in SPR—that's a 60-day supply of imported oil and 30-day supply of total US consumption. If we open SPR and sell that oil, what happens if our oil supply is sharply disrupted? At that point, we are powerless to ensure our own commerce. We would be fools to risk a security asset like SPR just to save a penny or two at the pump."

Senate Majority Leader Bill Frist (R-Tenn.) along with Domenici, currently opposes suspending SPR deliveries. That dovetails with what the administration is saying, for now. But with gasoline prices at higher levels than motorists are used to, the political pressure might result in the administration recalibrating its SPR policy, government officials predict privately.

In the meantime, Frist's Democratic counterpart, Minority Leader Tom Daschle (D-SD), promises he will soon seek a nonbinding Senate resolution for a SPR sale.

That SPR sale effort is led by Sen. Chuck Schumer (D-NY), who with a group of Senate Democrats want DOE to release 1 million b/d of oil for 30 days with an option to extend the release program an additional month.

"This will be a major issue in the election because the President is coming down on the side of big oil and Saudi Arabia over the needs of American drivers and the economy," Schumer said. The New York senator also dismissed Domenici's argument that releasing SPR oil incurs a security risk.

"There is no reason on God's green earth that we should not use the Strategic Petroleum Reserve," Schumer said.

Administration firm, for now
Sec. of Energy Spencer Abraham earlier Tuesday at a media briefing reiterated the White House's position not to sell oil from the reserve unless consumers are threatened by a sudden supply shortfall. Yet he did not rule out that the administration might, at some future date, consider a pause in the fill program.

Abraham also plans to discuss higher crude prices with oil ministers from the Organization of Petroleum Exporting Countries later this week in Amsterdam. Ministers will be there as part of a previously arranged producer-consumer conference but may signal what future production plans are for the summer.

If DOE does decide to suspend the program, it won't be the first time. Last year, for example, US President George W. Bush directed DOE to suspend SPR deliveries when political unrest led Venezuela crude imports to drop dramatically. The program was then restarted, and now the Gulf Coast reserve is about 95% full, with 660 million bbl in storage.

Renewed concerns over Venezuelan President Hugo Chavez's political agenda might again give the administration a reason it is looking for to suspend crude deliveries into the SPR, for example. Some analysts are concerned that heightened civil unrest in the country could again mean important shortfalls in both crude, and more importantly clean fuel imports.

Contact Maureen Lorenzetti at [email protected].