Today, Speaker Pelosi called on Americans to contact the White House and ask the President to draw down a small portion of the oil in the Strategic Petroleum Reserve to immediately expand available supplies, send a strong message to oil speculators, and help reduce the record prices that are helping push the economy toward recession. Rather than embracing the proposal the Speaker made in a letter to the President this week to help lower gas prices immediately, the White House slammed it saying 'It has been ineffective when it has been used for price manipulation in the past,' said White House spokesman Scott Stanzel. 'Releasing oil from the reserve would reduce the number of days of protection our nation would have in the event of a severe supply disruption. That is harmful to our national security and not in our country's best interests,' he said. [Reuter, 7/9/08]
There is nothing new or untested about releasing oil from the Reserve or deferring purchases during times of economic instability. The SPR has been tapped or suspended before by President Bush, President Clinton, and the first President Bush - with President Bush stating about his 2006 deferral that “we'll leave a little more oil on the market. Every little bit helps.” In 2000, this action brought the price of oil down by nearly 20 percent in a week. Two months ago, after initially opposing, President Bush signed bipartisan legislation to suspend government purchases of high-priced oil for the Strategic Petroleum Reserve (SPR).
Releasing oil from the Reserve is a tool to manage our national and economic security, and when judiciously used will not adversely affect our national security. The Reserve is currently more than 97 percent full - the highest level ever - with enough oil to meet our national security needs. We have more oil in the SPR than we did in 2006 (706 million barrels vs. 688 million in 2006) when President Bush deferred deliveries stating: “Our Strategic Reserve is sufficiently large enough to guard against any major supply disruption over the next few months.” The current inventory exceeds our International Energy Program commitment to maintain at least 90 days of oil stocks in reserve (when you include private and public stocks, as other countries do).
Republicans in Support of Modest Draw Down of Strategic Petroleum Reserve
Senator Kay Bailey Hutchison: “Now going forward, if we had a plan, I think that looking at taking some out [oil from SPR], on a measured basis, as part of an overall plan that would increase supply, I think [President Bush] would look at that as well. But we have about a four months supply now for emergencies, we've just seen what's happened in the Midwest, we know we're going to have emergencies. After Katrina we did take money ..oil out of the SPR…It would have a marginal effect…Every bit helps.” [ABC's This Week, 6/22/08]
Sen. Susan Collins (R-Maine): 'I am pleased that President Bush has released oil from the Strategic Petroleum Reserve, so we might ease the burden of high gasoline prices on individuals and families throughout the country…The SPR is intended to provide relief during periods of crisis, at times when working families are struggling to make ends meet. That time is now.' [8/31/05]
Rep. Heather Wilson (R-New Mexico): 'I ask that you begin to release oil from Strategic Petroleum Reserves to alleviate any further strain on our economy…The Strategic Petroleum Reserve was set up for emergency situations. This is an emergency situation.' [8/29/05]
History of Tapping the Strategic Petroleum Reserve
1990-1991 Desert Shield/Storm Drawdown. President George H.W. Bush withdrew oil from the Strategic Petroleum Reserve ahead of the first Gulf War on January 17, 1991. The Administration did a 5 million barrel test sale in September 1990 and a Presidentially-ordered drawdown of 17 million barrels in January 1991. According to the Energy Department, “The rapid decision to release crude oil from government-controlled stocks in the United States and other OECD countries helped calm the global oil market, and prices began to moderate.” The impact on oil prices following the President's announcement was immediate - oil prices dropped 33.4 percent over the following two days.
2000 Swap in the Face of Rising Prices. In late 2000, President Bill Clinton authorized a swap of oil in which 30 million barrels were released from the SPR to address rising oil and alleviate the threat of a home heating oil crisis due to low inventories. The MIT expert testified: “The results were immediate, in spite of the fact that oil had not yet moved into the market--demonstrating the psychological impacts on the market when the U.S. signals its intention to act. . . spot prices dropped almost 20%, from $37.22 to $30.26 a week later.” [Testimony of MIT expert, Melanie Kenderdine, Select Committee on Energy and Global Warming, 4/24/08]
December 2002- April 2003, Suspension. The Bush Administration delayed scheduled payments of more than 18 million barrels of Royalty In Kind (RIK) oil in 2002 and early 2003 in response to tightness in world oil markets and increasing prices in the run up to the Iraq War.
2005 Hurricane Katrina, Drawdown. Under President George W. Bush, DOE offered 30 million barrels of SPR oil (only 11 million gallons were actually withdrawn), helping reduce crude prices by about $5 a barrel. [Investor's Business Daily editorial, 3/8/08]
May 2006 -April 2007, Suspension. On May 3, 2006, President Bush deferred payment of 1.7 million barrels of RIK oil for nearly a year. President Bush said, “One way to ease price is to increase supply.... 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 at the Renewable Fuels Association, 4/25/06] The price of a gallon of gasoline was $2.92 a gallon and the price of a barrel of oil was $72.26. This action, along with several others, helped bring down the price of oil by about 5 percent. [CNN, 5/3/06]
Experts on the Price Effect of Strategic Petroleum Reserve
“[a] … drawdown of the SPR to influence prevailing oil prices would be likely.. to produce a meaningful price response…” -- Kevin Book, Senior Vice President, Senior Analyst, Energy Policy, Oil & Alternative Energy, Friedman, Billings, Ramsey & Company, Inc., testimony before the House Select Committee on Energy Independence and Global Warming, 4/24/08
“Taking barrels of oil off the market to put in the Reserve puts upward pressure on prices. ” - Dr. Frank Rusco, Acting Director, Natural Resources and Environment, Government Accountability Office, 4/24/08
Goldman Sachs estimated that filling the reserve raised oil prices by as much as $6 a barrel and 25 cents a gallon at the pump. [Investor's Business Daily editorial, 3/8/08]
Petroleum economist Philip Verleger estimates that the fill over the past two years has already added $8 to $10 per barrel. These increases, in turn, boost gasoline prices by 10 cents to 25 cents per gallon. [Detroit Free Press, 4/13/04]
A 2003 report by the Minority Staff of the Permanent Subcommittee on Investigations of the Senate Committee on Governmental Affairs concluded that oil deposits to the SPR drove up crude oil prices by tightening supply and reducing domestic stocks.