Posted on 03/30/2004 2:22:04 PM PST by Jean S
WASHINGTON (AP) - When gasoline prices soar, talk of using America's emergency oil reserve is never far behind, especially in an election year.
Democrat John Kerry pressed the issue Tuesday when he chastised President Bush for pumping millions of barrels of oil into the government's Strategic Petroleum Reserve at a time when commercial oil supplies are tight and gasoline prices are surging to record highs.
Experts are divided on whether the reserve's oil should be used to tame prices or even whether its oil would have much of an impact on world markets. The reserve is designed to provide an emergency flow of crude should supplies be cut off and not to manipulate prices, many energy analysts argue.
While Kerry did not suggest the government release some of the 650 million barrels held on salt domes on the Gulf coast, he said it made no sense to keep diverting oil into the reserve when economists cite tight commercial inventories as one reason for the high energy prices.
The White House dismissed Kerry's argument, saying that filling the reserve to its maximum 700 million barrels is a matter of national security and should not be interrupted. The Energy Department plans to put 25 million additional barrels into the reserve before Election Day.
"It's important that we have the necessary resources in the event of a severe disruption of supply," White House press secretary Scott McClellan, told reporters.
Republicans and a Bush campaign ad sought to shift attention from the issue of the reserve, arguing that Kerry in the past has favored higher gasoline taxes. Kerry responded by portraying the White House as too cozy with the oil industry.
If president, Kerry said, he would pressure the Organization of Petroleum Exporting Countries to provide more oil. He also said he would simplify rules on gas to reduce costs and develop more energy-efficient vehicles. But more immediately, he hammered away at Bush's decision to divert oil to the reserve and out of private markets.
Energy experts disagree on whether the relatively small amount of oil going into the SPR - currently 115,000 barrels a day - would force down oil and gasoline prices if left in the market place.
"I don't think there would by any significant, any visible impact," said John Lichtblau, chairman of the nonprofit Petroleum Industry Research Foundation, although he said there could be a momentary response "because the market is not always rational."
Philip Flynn, a senior energy analyst at Alaron Trading Corp., in Chicago, said, "There's a false assumption that if the government stops buying oil for the reserve it's going to end up magically in the private reserves. It could end up in China or Timbuktu for all we know."
Some economists cite the example in 2000 when then-President Clinton released 30 million barrels of oil from the SPR to try to ease heating oil prices. Later it was learned that much that oil actually displaced planned imports that were diverted to other countries instead of going to the United States.
But none of that has convinced a chorus of Democrats, including Kerry, and some Republicans. They view a diversion of oil from the market as folly at a time when commercial stocks are precariously low, crude prices recently reached a 14-year high, and gasoline prices are expected to average a record $1.83 nationwide this spring. The private Lundberg Survey put gas prices nationally this week at $1.80 a gallon and more than $2 a gallon in some areas.
"It's illogical and counterproductive" to put oil into SPR at this time, says Sen. Carl Levin, D-Mich., whose staff has been investigating the relationship of SPR oil and energy prices for two years. "The administration should listen to common sense."
Levin's staff cites internal Energy Department documents including one by a SPR manager who in 2002 warned against putting oil into the reserve when commercial inventories are low, prices high and economic growth slow.
Energy Secretary Spencer Abraham, pressed by Levin at a Senate hearing this week, said the SPR official had a right to his opinion, but that the administration view is that the continued flow of oil into the SPR was a matter of national security and has negligible impact on world oil prices.
Economist Phil Verleger, also an energy consultant, argues that energy pricing models show that diverting oil into SPR has to impact prices. "There's only one way you can come to a conclusions that it doesn't affect it and that is if OPEC has compensated by increasing production and I find no record of that," said Verleger in an interview.
Levin also cites a report in January by GoldmanSachs, a leading oil trader, that estimated the buildup of government crude in SPR during 2003 added $2.25 a barrel to oil prices and that the anticipated flow of oil into the reserve this year "will likely provide further support" to keeping oil prices high.
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On the Net:
Strategic Petroleum Reserve http://www.spr.doe.gov
AP-ES-03-30-04 1648EST
Gee, this isn't biased reporting.< /sarcasm>
If president, Kerry said, he would pressure the Organization of Petroleum Exporting Countries to provide more oil.
How?
I love it when Kerry talks money. The more he does, the more the economists can catch him in the act.
How in hell would he do this?
Supposedly, Bush's daddy knows the Saudi royal family personally, and HE can't do anything about it.
Why not drill for oil in ANWR?
I heard some oil analyst on CNBC yesterday say that stopping oil flowing into the SNPR would lower the price by one penny!
Or, would the gov't sell the oil at the going rate and calculate a hefty profit margin?
This could backfire on Kerry.
How so? I think it simply enhances his reputation as an idiot.
IOW, Kerry is blowing smoke.
Point is that the little bit that we didn't take out of the bucket to put into reserve would not decrease prices to the USA any more than the other nations that take oil from the bucket. Taking oil from the reserve and putting it into the bucket helps lower the price for all as well.
The USA and certain states with special formulas such as CA are producing at Gasoline at capacity and could not take advantage of any increaser supplies.
What the USA needs is more refinery capacity, a standard formulation, increased storage for finished product and new sources of oil.
There's a novel idea in there, about a war hero who is abducted by sinister forces and brainwashed. Later, he runs for elective office.
Coming to a bookstore near you: The Wahabbist Candidate
(Whadaya mean, it's derivative?)
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