WASHINGTON – Senators were divided Thursday on whether the government should release crude oil from its emergency reserve in an attempt to boost sagging petroleum inventories and dampen soaring energy prices.
Several oil industry experts told a Senate hearing that premature release of oil from the government's Strategic Petroleum Reserve could backfire and prompt producers such as Saudi Arabia to cancel plans to increase production.
Sen. Pete Domenici, R-N.M., chairman of the Energy and Natural Resources Committee, said the Bush administration ought to "keep everyone guessing" on its plans for using the reserve. He said he didn't think the emergency oil stocks should be tapped now.
But some Democrats said President Bush should tap the reserve since commercial crude inventories are at a 27-year low and oil prices are at $36 a barrel and rising.
"I strongly favor a release (of oil) now," said Sen. Ron Wyden, D-Ore., adding that "the lack of a clear policy" from the administration on use of the emergency stocks is contributing to the uncertainties that have roiled the oil markets.
The White House "should at least state their intentions" and make clearer that it was ready to use emergency oil stocks if needed, said Sen. Jeff Bingaman, D-N.M.
Bush has resisted several calls to tap the oil reserve, held in salt caverns on the Gulf Coast of Louisiana and Texas. The reserve has about 600 million barrels and could release a maximum of 4 million barrels a day. The United States uses 20 million barrels of oil and refined products a day; a little over half of that comes from imports.
Energy Secretary Spencer Abraham said Wednesday, "We have not changed our view" that the reserve should be used only if there are severe supply issues and disruptions related to national security. He rejected using the emergency oil stocks to influence prices.
Several witnesses before Domenici's committee also expressed concern about using the reserve short of a supply disruption. They noted that the emergency oil will be needed if war with Iraq disrupts Persian Gulf oil supplies.
"At some point it's likely that our SPR (oil) will need to be drawn," energy consultant Matthew Simmons told the senators. "But it's also critical that this is not done prematurely." If the United States moves unilaterally to release its emergency stocks to try to influence prices, oil destined for the United States will "turn away to other parts of the world," he said.
Robert Ebel, director of energy programs at the Center for Strategic and International Studies, said, "We should be prepared to release oil," but only to counter a major supply disruption.
But James May, who heads the Air Transport Association and represents the nation's airlines, urged senators to pressure Bush to release emergency stocks immediately to force down prices. He said jet fuel has doubled in price over the past year and recent fuel price increases threaten the survival of some air carriers.
"Every penny increase in the price of jet fuel costs the airline industry $180 million a year," he testified. A million-barrel-a-day release of oil from the strategic reserve "would be a huge boost to our struggling economy" including the airlines, said May.