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.

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.”

Headline Link: ‘Energy Dept. to Suspend Shipments to U.S. Oil Reserve’

Background: The SPR, oil and politics

Opinion & Analysis: Why halting shipments could help, or hurt

Related Topic: Oil prices rise with no relief in sight

Reference: The Strategic Petroleum Reserve


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