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St. James Terminal, a marine unloading and distribution point for crude oil, located
southwest of Baton Rouge, La., is shown in 1990. This pipeline serves the U.S. Strategic
Petroleum Reserve.
southwest of Baton Rouge, La., is shown in 1990. This pipeline serves the U.S. Strategic
Petroleum Reserve.
Energy Department to Halt Shipments to Strategic Oil Reserve
May 16, 2008 02:46 PM
by
findingDulcinea Staff
The U.S. Department of Energy announced Friday that shipments of oil to the Strategic Petroleum Reserve have been cancelled for a six-month period starting July 1.
30-Second Summary
July 1 is when “the current purchase contract expires,” writes the Associated Press.
The Strategic Petroleum Reserve is a system of underground salt domes on the coast of the Gulf of Mexico, created in the 1970s as a precaution against major interruptions of oil supplies. Currently the reserve is 97 percent full with 701 million barrels, equal to two months of oil imports.
The Senate moved in an overwhelmingly bipartisan 97-1 vote on Tuesday to curb shipments to the reserve for the rest of the year. The House followed suit that afternoon, voting 385-25 to halt deliveries.
Senators say this stockpile is big enough to deal with any emergency, and with oil prices above $120 a barrel, continuing the shipments is irresponsible.
"We are buying the most expensive crude oil in the history of the world and storing it," said Sen. Byron Dorgan, D-N.D. "When American consumers are burning at the stake by high energy prices, the government ought not be carrying the wood."
President George W. Bush has been steadfast in continuing shipments of oil to the reserve until it reaches its capacity of 727 million barrels.
The oil reserve was the subject of controversy in May 2004, when congressional Democrats put pressure on the Bush administration to ease gas prices by releasing oil from the stockpile. But administration officials remained opposed the policy change, saying the SPR was never intended to be used to help ease oil prices.
The Los Angeles Times writes that although legislation to halt shipments to the reserve is popular when gas prices peak, it is still a bad idea. “The problem is that today's high gasoline prices probably aren't very temporary. Oil is at $125 a barrel because of a broad market consensus that supplies will not significantly increase in the near future,” according to the Times. “That's all the more reason for the U.S. to keep stockpiling reserves.”
The Strategic Petroleum Reserve is a system of underground salt domes on the coast of the Gulf of Mexico, created in the 1970s as a precaution against major interruptions of oil supplies. Currently the reserve is 97 percent full with 701 million barrels, equal to two months of oil imports.
The Senate moved in an overwhelmingly bipartisan 97-1 vote on Tuesday to curb shipments to the reserve for the rest of the year. The House followed suit that afternoon, voting 385-25 to halt deliveries.
Senators say this stockpile is big enough to deal with any emergency, and with oil prices above $120 a barrel, continuing the shipments is irresponsible.
"We are buying the most expensive crude oil in the history of the world and storing it," said Sen. Byron Dorgan, D-N.D. "When American consumers are burning at the stake by high energy prices, the government ought not be carrying the wood."
President George W. Bush has been steadfast in continuing shipments of oil to the reserve until it reaches its capacity of 727 million barrels.
The oil reserve was the subject of controversy in May 2004, when congressional Democrats put pressure on the Bush administration to ease gas prices by releasing oil from the stockpile. But administration officials remained opposed the policy change, saying the SPR was never intended to be used to help ease oil prices.
The Los Angeles Times writes that although legislation to halt shipments to the reserve is popular when gas prices peak, it is still a bad idea. “The problem is that today's high gasoline prices probably aren't very temporary. Oil is at $125 a barrel because of a broad market consensus that supplies will not significantly increase in the near future,” according to the Times. “That's all the more reason for the U.S. to keep stockpiling reserves.”
Headline Link: ‘Energy Dept. to Suspend Shipments to U.S. Oil Reserve’
“The move came days after Congress passed legislation requiring the president to suspend the shipment into the reserve in hopes of lowering gasoline prices,” reports the Associated Press.
Source: Houston Chronicle (AP)
Background: The SPR, oil and politics
The measures voted on by the Senate and Congress differ somewhat, and would need to be reconciled before final congressional approval. Nonetheless, the votes were symbolic in illustrating shared, bipartisan frustration over oil prices, the AP reports. However, Rep. Joe Barton, R-Texas, who opposed the measure, said it was "ludicrous" to suggest that putting a modest amount of oil into the market could shave 25 cents off the price of a gallon of gas.
Source: Seattle Post-Intelligencer (AP)
In May 2004, congressional Democrats put pressure on the Bush administration to release as much as 60 million barrels from the reserve over two months to help alleviate high oil and gas prices. At the time, regular gasoline had climbed above $2 for the first time and crude oil hovered around $41 a barrel.
Source: The New York Times (free registration may be required)
Open CRS, which provides congressional research reports, analyzes the history of, perspectives on and issues surrounding the Strategic Petroleum Reserve. “The dynamics of world oil markets, and price sensitivity to planned or unplanned events that temporarily reduce refinery production, have added new complexities to decision making on when to fill and to use the SPR,” according to the summary of the report. The entire report is available as a PDF file on the group’s Web site.
Source: Open CRS (PDF document)
Tuesday’s vote came as President Bush leaves for a six-day tour of the Middle East. He plans to push for Israeli-Palestinian peace efforts during his trip, and will also meet with King Abdullah of Saudi Arabia for the 75th anniversary of the formal establishment of U.S.-Saudi relations. The president is expected to press the Saudis to boost their oil production to help reign in increasing oil prices.
Source: RTT News
Gas prices rose an average of 2.6 cents overnight to a record of over $3.75 a gallon Wednesday, according to AAA and the Oil Price Information Service. Gas prices are 67 cents higher than a year ago, and are expected to continue rising until Memorial Day weekend, at least.
Source: Forbes (AP)
Opinion & Analysis: Why halting shipments could help, or hurt
Lawmakers who recommend halting shipments to the SPR are right, writes Lincoln Anderson for The Wall Street Journal. In fact, the government should be selling oil from the reserve. “We should sell oil out of the SPR when oil prices are high, say above $80 or $90 a barrel, and buy oil when oil prices drop below $40. The SPR would then become a powerful tool to stabilize crude oil prices but at a lower level, while generating a sizable profit for taxpayers,” Anderson writes.
Source: The Wall Street Journal (registration required)
However, the decision to stop stockpiling oil is a “bad economic bet” according to a Los Angeles Times editorial. The newspaper writes that the decision would be “bad for national security and gives the American public the false impression that lawmakers are actually doing something about skyrocketing gasoline prices.”
Source: Los Angeles Times (free registration may be required)
Related Topic: Oil prices rise with no relief in sight
U.S. gas prices have been breaking records consistently this year, and some experts believe oil prices will continue to rise significantly, even reaching $200 a barrel in the future.
Source: findingDulcinea
Many experts believe that the supply of oil, America’s primary source of energy, is leveling off and may soon begin to drop permanently. Americans must begin to conserve now to avert a drastic shortfall. FindingDulcinea suggests 10 practical ways to do so.
Source: findingDulcinea
Reference: The Strategic Petroleum Reserve
The U.S. Department of Energy provides general information about the SPR on its Web site. “Decisions to withdraw crude oil from the SPR are made by the president under the authorities of the Energy Policy and Conservation Act. In the event of an energy emergency, SPR oil would be distributed by competitive sale,” reads the site.
Source: The U.S. Department of Energy
The Department of Energy also provides quick facts and frequently asked questions about the SPR. Information about the release of reserve oil during past emergencies is also included. For instance, 11 million barrels were sold following Hurricane Katrina in 2005.
Source: The U.S. Department of Energy
© 2009 Dulcinea Media, Inc.
