Tomorrow, the House will vote on the Strategic Petroleum Reserve Fill Suspension and Consumer Protection Act (H.R. 6022) to direct the President to temporarily suspend the fill of the Strategic Petroleum Reserve (SPR) through the end of the year. We would only resume filling the SPR between now and December if oil prices dropped below $75 per barrel.
Filling the SPR takes 70,000 barrels of oil off the market each day, even though the reserve is 97 percent full - enough to meet our national security needs. Democrats and Republicans agree that the American people would benefit from suspending these government acquisitions and purchases. It could reduce gas prices by 5 to 24 cents a gallon - a critical first step for America's families, businesses, and the economy.
The SPR has been tapped or temporarily suspended before by President Bush, President Clinton, and the first President Bush. In 2000, after such action, the price of oil dropped by one-third - from $30 to $20 per barrel. In April 2006, President Bush understood the real impact suspending oil purchases and acquisitions for the SPR would have for consumers -
“One immediate way we can signal to people we're serious about increasing supply is to stop making purchases or deposits to the Strategic Petroleum Reserve for a short period of time. I've directed the Department of Energy to defer filling the reserve this summer. Our strategic reserve is sufficiently large enough to guard against any major supply disruption over the next few months. So by deferring deposits until the fall, we'll leave a little more oil on the market. Every little bit helps.” [President Bush, 4/25/06]
Even though gas prices are hitting new records almost daily, this year the President has consistently rebuffed calls to suspend the fill of the SPR - saying such action would not “affect the price of oil positively.” [AFP, 4/29/08] The usual GOP supporters of his “Drill and Veto” energy plan are not with him on this one. President Bush needs to listen to bipartisan voices in Congress:
Republicans Supporting a Temporary Suspension of Oil Deposits to the SPR:
Rep. Roy Blunt (R-Missouri)
“I think we should stop filling it. The White House doesn't agree with that position. But that's one thing that would have impact at the pump.” [CNN, 5/11/08]
Sen. Kay Bailey Hutchison (R-Texas)
“I support an immediate halt in the deposits of domestic crude into the SPR as we enter the busiest driving season of the year.” [Reuters, 4/29/08]
Sen. Charles Grassley (R-Iowa)
“There are few actions that can be taken that will have a near-term impact on the price of oil and gasoline…However, halting the deposits of crude oil in the [Strategic Petroleum Reserve] is a small but positive step that can increase the supply of crude oil in the market, and hopefully reduce the price at the pump.” [LAT, 5/8/08]
Sen. Pete Domenici (R-New Mexico)
“I was against it and now I'm for it…There's a shift in the party, and it's because of gas prices.” [CQ, 5/1/08]
Letter to the President from 16 Senate Republicans
“Temporarily halting deposits to the reserve can provide some relief because the increased supply of oil available for refinement will send the right signal to all markets that the U.S. Government will take measures necessary to address exorbitant crude oil prices that negatively affect the global economy. We believe, in light of the dramatic increase in oil prices, a temporary halt to deposits into the SPR should be considered until the economy stabilizes.” [4/29/08]
Excerpts from the Wall Street Journal - How to Use the Strategic Petroleum Reserve
May 9, 2008
By LINCOLN ANDERSON
John McCain and a number of other senators have been recommending that the Bush administration stop buying crude oil for the Strategic Petroleum Reserve (SPR). They're right.
Over the last eight months, the Department of Energy purchased more than 10 million barrels of oil for the SPR as the price rose $40 to above $120. This is not sensible. It puts upward pressure on oil prices at the worst possible time. It is a waste of taxpayer money. It gives aid and comfort to unfriendly nations. And it is an insurance policy that, for the most part, is no longer needed…
…First, a little background. The Strategic Petroleum Reserve was established in 1976 in response to the growing instability of the Persian Gulf oil supply, and to address the threat to oil imports in the event of a war with the Soviet Union. It's been used sparingly: The largest drawdown was only 17 million barrels in 1991 during Desert Storm.
Today we have 701 million barrels of oil stored, of which 4.4 million barrels a day can be pumped. This could replace three quarters of OPEC imports for about 150 days…
…The blunt fact is that the price of crude oil on global markets is controlled by this cartel of governments: With 40% of world oil production, it is the biggest player, and it uses its clout. True, OPEC's market share has eroded to 40% today, down from 52% in 1973. But non-OPEC production is already starting to falter…
Mr. Anderson is chief investment officer and chief economist at LPL Financial in Boston, Mass.