Senators question administration’s petroleum reserve policy

| Friday, February 29, 2008

With no real relief from soaring fuel prices, members of the U.S. Senate are keeping the heat on the Bush administration’s policies on managing the Strategic Petroleum Reserve.

“I am concerned about the current policy to fill the SPR with Royalty-in-Kind oil from the Department of the Interior, regardless of market conditions, and for that reason I have co-sponsored Sen. Dorgan’s bill to take a timeout on filling the SPR,” Sen. Jeff Bingaman, chairman of the Senate Committee on Energy and Natural Resources, said in a statement Feb. 26.

“As we face the threat that Venezuela might suspend oil shipments to the United States, it is more appropriate in my view to consider releasing the SPR rather than filling it.”

The Democrat from New Mexico released the statement outlining his concerns the same day the committee held a hearing on the SPR policies.

The hearing is just another front on which the SPR policies are being attacked.

The introduction of the bill by Sen. Byron Dorgan, D-ND, in early February came hot on the heels of a Department of Energy recommendation to beef up the reserve in its 2009 budget request.

If passed into law, the bill would direct the energy secretary to temporarily stop putting more than 50,000 barrels of oil a day in the Strategic Petroleum Reserve when crude oil prices are at record levels.

Under Dorgan’s plan, the federal government would suspend acquisition of oil for the Strategic Petroleum Reserve for the rest of 2008 or until the price of petroleum falls to $50 per barrel or less.

“It makes no sense to be storing oil underground in a Strategic Petroleum Reserve that is already nearly 97 percent full when oil and gasoline prices are at record highs,” Dorgan said. “Oil topped $100 per barrel earlier this year, and stocking up to put it underground drives gas prices higher by removing oil from the market.”

The bill is cosponsored by Bingaman; Sen. Carl Levin, D-MI; Sen. John Kerry, D-MA, Sen. Susan Collins, R-ME; Sen. Joe Lieberman, I-CT; and Sen. Ron Wyden, D-OR.

That bill wasn’t even the first time limiting contributions to the reserve had been suggested this year. In fact, Jim Johnston, president and CEO of the Owner-Operator Independent Drivers Association, encouraged doing just that in a Jan. 30 letter to President Bush.

In the letter, Johnston explained that a 5-cent increase in fuel costs per gallon adds roughly $1,000 to a trucker’s annual costs – and that diesel prices have increased 40 cents per gallon in the past six months alone.

Johnston called on President Bush to stop putting oil into the nation’s Strategic Petroleum Reserve until fuel prices ease.

“Right now they’re diverting almost 50,000 barrels of oil a day into the Strategic Petroleum Reserve,” Johnston said during an interview on “Land Line Now.”

“You have a double impact there. You first have the impact at the pump with the federal government competing with consumers for purchasing that fuel.

“The other thing is that the government is using taxpayer dollars to purchase fuel for the Strategic Petroleum Reserve at a time when fuel is at its highest price. It makes sense to discontinue that diversion until the price of that fuel drops and it has less impact on consumers.”

Johnston also called on the president to use his influence to try to stop the export of American diesel and biodiesel to other countries, noting that every drop of biodiesel is subsidized by U.S. taxpayers.

To read the letter Johnston sent to the president, click here.

– By Jami Jones, senior editor
jami_jones@landlinemag.com

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