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Lawmakers Push Bush to Curb Oil Reserve

THE WALL STREET JOURNAL: Lawmakers Push Bush to Curb Oil Reserve

April 25, 2008

WASHINGTON — Lawmakers cranked up pressure Thursday on the Bush administration to stop filling the nation’s Strategic Petroleum Reserve amid growing election-year anxiety on Capitol Hill about high gasoline prices.

Department of Energy officials have repeatedly said they would continue to fill the emergency reserve under the royalty-in-kind program, which accepts oil from companies in lieu of cash, at a rate of 76,000 barrels a day. They also said they would still consider soliciting bids for a further addition to replace oil sold during the 2005 hurricane season.

Speaker of the House Nancy Pelosi (D., Calif.) called on President Bush to suspend filling the reserve, a move she said would directly lower the price of gasoline at the pump. She estimated it could take 5 cents to 24 cents off the price of a gallon of gas.

In the Senate, Charles Schumer (D., N.Y.) said he would attach to an appropriations bill a requirement that the government pause in filling the reserve if oil prices go above $75 a barrel.

Oil prices have traded near $120 a barrel in recent days, closing Thursday in New York at $116.06 a barrel. Gasoline prices in some parts of the country are topping $4 a gallon, with the national average above $3.51 a gallon.

Trade groups representing truckers and airlines — for whom rising fuel costs are the greatest operating expense — have lobbied for a release of oil from the strategic reserve as a way to bring down prices.

The White House rejected the lawmakers’ calls. “The purpose of the Strategic Petroleum Reserve is to provide the U.S. with oil in the event of a severe disruption of supply,” spokeswoman Dana Perino said. “It has been ineffective when it has been used to manipulate the price in the past, and the administration continues to fill the reserve at a very modest rate and we don’t believe the fill rate has a meaningful impact on oil supplies.”

The Department of Energy said it is studying the market impact of potential purchases of oil for the strategic reserve. It has long downplayed the impact that the royalty-in-kind program has on prices or supplies, saying volume typically amounts to 70,000 barrels a day, out of global demand of more than 85 million barrels a day.

The DOE said it will decide in coming weeks whether to go ahead with a controversial plan to buy crude oil in the open market to increase the pace of further increases in the reserve.

Mrs. Pelosi said that the reserve is around 97% full currently, and that the U.S. could afford not to keep filling it while gasoline prices remain so high. As of Thursday, the DOE reported the reserve was at a record level of 701.3 million barrels.

Mrs. Pelosi said this effort would be more successful in lowering gasoline prices immediately than would a plan by likely Republican presidential candidate Sen. John McCain (R., Ariz.) to remove federal gasoline taxes during the summer driving season. Sen. McCain has also called for a halt to oil diversions to the strategic reserve.

Separately, a group of senators led by Sen. Schumer sent a letter to President Bush demanding that he urge Saudi Arabia, the United Arab Emirates and Kuwait to increase oil supplies, “or risk that Congress blocks their lucrative arms deals while they stick it to American consumers at the pump.”

It’s unlikely the Senate group will be able to carry out such a threat. Any bill blocking the sale would likely face a veto from the White House, which Thursday rejected the plan. In addition, other countries are already offering their own arms deals to Saudi Arabia, the United Arab Emirates and Kuwait.

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