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US lawmakers eye oil reserves

DPA, WASHINGTON
Tuesday, Mar 22, 2005, Page 9

Nearly 700 million barrels of oil are stored by the US government in huge underground salt caverns deep beneath the surface of Texas and Louisiana -- enough to supply the country's oil needs for 35 days, and enough, say some politicians, to bring down the soaring price of petrol.

The amount in the US Strategic Petroleum Reserve (SPR) represents about half of the world's publicly-held oil storage, far more than commensurate with its daily consumption of about 25 percent of world oil production.

Other countries with reserves include the 25 industrialized countries that, along with the US, make up the International Energy Agency (IEA). An IEA official in Paris said some countries do not reveal how much oil they have stocked.

China announced recently that it, too, plans to build up a strategic reserve beginning next year, and India, the world's second most populous nation, also wants to stock oil.

India wants to build up a reserve that equals two weeks of oil consumption, according to media reports, while China hopes to build storage capacity for at least 150 million barrels.

Meant as the safety net that would keep the US going in times of an emergency, the SPR has also become a political play ball as oil prices have soared above US$50 per barrel.

The minority Democratic party, in a move to tie the administration of Republican President George W. Bush to the high prices, has called repeatedly on the White House to release some of the reserves to ease the high cost of gasoline.

Recently, a group of 17 US senators, 16 Democrats and a Republican, called on Bush to release some of the oil from the SPR to "counteract [OPEC] supply cuts and calm the markets."

"The rising price of gasoline is already beginning to place a financial strain on consumers that could threaten the nation's economic security," the lawmakers said.

But the Bush administration responded that it would not release oil from the SPR to bring down prices. White House spokesman Scott McClellan said the reserve should not be used to "manipulate prices or for political purposes."

While proponents of opening the spigots of the reserve claim that it would ease prices, John Felmy, chief economist of the American Petroleum Institute said OPEC could simply cut production to keep prices up.

"You're in a card game with someone holding all the aces," Felmy said regarding trying to influence prices by releasing oil from the SPR.

In 2000, president Bill Clinton caused oil prices to drop temporarily after using 30 million barrels from the reserve to ease high costs for gasoline, but Felmy said the success of the maneuver was short-lived after OPEC reduced supply.

In addition, Felmy stated the SPR is a very limited reserve for purposes of controlling costs and that it should be used only for emergencies.

The lawmakers asking Bush to tap into the SPR argue high gasoline prices would unduly burden Americans as the summer driving season is nearing.

"If left unchecked this summer, these high gasoline prices will continue to burden our economy by taking desperately needed money out of the hands of working families and placing it into the pockets of OPEC," they said.

Generally, the US president can open up the strategic reserve if there is a "severe energy supply interruption," such as during times of war or following a natural disaster. Oil from the SPR can reach the US market within two weeks of a presidential order and a maximum of 4.3 million barrels can be withdrawn daily for 90 days, according to the energy department.

"There are national security reasons why we have a Strategic Petroleum Reserve," McClellan said, adding that the best way to address increasing prices and dependence on foreign oil would be for Congress to pass the president's energy bill, which would open up parts of Alaska for oil drilling and promotes new energy sources.

The maximum capacity for the reserve is 727 million barrels and it is stored in caves because they "offer the lowest cost, most environmentally secure way to store crude oil for long periods of time," officials said.

Last Wednesday, in a development related to energy supplies, the US Senate moved Bush one step closer to his push to open up the pristine Alaska National Wildlife Refuge (ANWR) for drilling -- a move that environmentalists have fought for 20 years.

Using a parliamentary maneuver, the Senate attached approval for drilling there to a budget bill, which only requires a simple majority to pass.

The move ducks the two-thirds majority hurdle that has defeated passage of the opening of ANWR in the past. Democrats have cried foul at the move.

The overall budget bill must still be voted on -- something Congress has failed to do several times in past years. The budget bill is not really necessary, since it only gives a general sense of how Congress wants to spend money for the next fiscal year. The real spending authority comes later in the year with detailed appropriations bills.
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