Lawmakers Propose Uncapping Petroleum Reserve

Lawmakers on both sides of the political aisle are demanding that President Bush tap the Strategic Petroleum Reserve (search) to help American consumers cope with the cost of record-high gasoline prices.

But not everyone thinks tapping the reserve is a recipe for long-term success.

Last week, Democratic senators called for an oil swap from the reserves, similar to a plan enacted under the Clinton administration in 2000 to help Northeastern consumers deal with high home heating costs.

“The petroleum reserves are intended to provide relief at times when working families are struggling to make ends meet,” wrote Sen. Charles Schumer, D-N.Y., a longtime advocate of manipulating reserve schedules, in a letter sent to the president last week. “That time is now.”

Schumer and Democratic Sens. Barbara Boxer of California and Harry Reid of Nevada said last week that since the reserve is close to hitting its 700 million-barrel capacity, the administration should temporarily cease stockpiling the reserve with 100,000 barrels of oil each day.

Rep. Robert Goodlatte, R-Va., agrees that the administration needs to cease stockpiling the reserve in order to divert the barrels into the open market.

“It is time to act, and to make sure that rising energy prices do not stall the rising economic recovery,” he told

He and more than 55 bipartisan members of the House signed their own letter to Bush earlier this month that urges the administration to restore old procedures that would allow the deferral of oil deliveries into the reserves “when crude oil prices are high or commercial crude oil supplies are tight.”

According to AAA (search), formerly the Automobile Association of America, nationwide gasoline prices hit a record high of $1.74 per gallon, up from an earlier peak reached in August 2003. The high price of crude oil — hovering around $37 a barrel in the last week — matched with high demand and lean commercial inventories of gasoline have sparked the increases, with little hope for prices to decline over the coming summer, industry officials report.

Opponents of raiding the SPR suggest that lawmakers aren't considering the purpose of the reserve.

“For politicians, it’s a win-win situation. They play to the consumers, it doesn’t cost them anything, it gets them a good headline in the press,” said Robert Ebel, energy expert with the Center for Strategic and International Studies (search) in Washington, D.C.

“But [the reserve] was designed for emergency purposes, it was not designed for price manipulation,” he said. “We need to put this into perspective,” he said

Other say trying to mimic the scheme used by Clinton in 2000 is a bad idea. Clinton found himself mired in political problems as a result of tapping into the oil, and the release of 30 million barrels had only a very short-term effect on prices.

“People have short memories,” said John Felmy, chief economist with the American Petroleum Institute (search), which represents oil companies. “The way it was executed, it did not go smoothly. It had a temporary effect, but the prices shot back up.”

Felmy said problems arose when an extension on the deadline for returning the 30 million barrels had to be granted to the companies that borrowed the oil.

So far, the administration says it has no plans to go back on a post-Sept.11, 2001, strategy to fill the reserves to capacity.

“The president believes the SPR should only be used for protection against oil supply disruptions, and not to manipulate price,” Jeanne Lopatto, director of public affairs for the Department of Energy, told

“Congress should focus on fixing the fundamental problems, which cause high energy prices in the first place,” she said, suggesting lawmakers pass energy legislation that would increase domestic drilling for oil and encourage the use of alternative fuels.

Ben Lieberman, energy expert at the Competitive Enterprise Institute (search), said rather than making demands on the reserves, lawmakers should fix many of the burdensome state and federal regulations that are driving up oil prices, especially in "clean states" like California,

"It's political grandstanding," Lieberman said of the proposals. “How about streamlining some of the environmental regulations that make it more expensive to make gasoline?”

The SPR was authorized in 1975 after the 1973 Arab oil embargo triggered an energy crisis in the United States. Oil began flowing into the reserve in 1978 with the condition that it would not be used except for in an emergency situation that also would have caused a spike in energy prices.

At full capacity, the reserves are expected to meet daily U.S. consumption levels for 90 days.

Besides tapping into the reserve in 2000, Clinton authorized the use of the reserve three times in 1996 — to pay for decommissioning of the old Weeks Island oil storage site (search), to offset fiscal year 1997 appropriations and to help pay down the federal deficit.

Clinton is not the only president to break into the reserve. President George H.W. Bush briefly suspended stockpiling and put 30 million barrels of reserve oil onto the market immediately after the first strikes in the 1991 Persian Gulf War (search), when cutbacks in oil output were expected.

Several members of Congress say the current circumstances are exactly those that call for tapping into the reserve — an emergency situation that is hitting American pocketbooks hard and consistently.

“The American people deserve relief,” Reid said in a recent statement, noting that gas prices increased 35 cents a gallon in Nevada in February alone.