Bush wants to double U.S. emergency oil stockpile
Tuesday, January 23, 2007; 9:18 PM
WASHINGTON (Reuters) - The United States will begin buying crude oil this spring as part of the Bush administration's plan to eventually double emergency reserves to shore up energy security, the White House said on Tuesday.
In his annual State of the Union address to Congress President Bush called for doubling the Strategic Petroleum Reserve from 727 million barrels to 1.5 billion barrels by 2027.
The White House said the move would give U.S. consumers an insurance policy equivalent to about 97 days worth of imports to insulate the world's biggest oil consumer from global price shocks.
"To further protect America against severe disruptions to our oil supply, I ask Congress to double the current capacity of the Strategic Petroleum Reserve," Bush said in prepared remarks.
The effort is part of a growing focus on "energy security" by both the Bush administration and Congress aimed at increasing home-grown fuel sources, like ethanol, in order to reduce U.S. dependency on oil imports.
The reserve, created by Congress in the mid-1970s in response to the Arab oil embargo, currently holds about 691 million barrels of crude at four underground storage sites in Louisiana and Texas. Legislation passed in 2005 called for building storage to 1 billion barrels.
The U.S. government has tapped the reserve several times in recent years -- in 1991 when Iraq invaded Kuwait and again in 2005 after hurricanes Rita and Katrina slammed into the U.S. Gulf Coast oil patch.
Bush's new plan calls for a massive buildout, but does not specify what form it will take. Government estimates put the price tag for the additional capacity at about $65 billion over 20 years, with about $55 billion of that coming from the cost of the crude oil.
Bush did not specify in his speech how the government will come up with the money, which would need Congress' approval.
SPRING FILL UP
Earlier, U.S. Energy Secretary Sam Bodman said the government will begin by purchasing about 11 million barrels of replacement crude this spring, adding oil at a rate of around 100,000 barrels a day.
The crude should be in the reserve by the end of the summer, an Energy Department spokesman said.
The government will fund the purchase with $600 million raised when it sold 11 million barrels of reserve oil to U.S. refiners in 2005 after Hurricane Katrina hit the Gulf Coast.
Beyond 2008, the department will fill the reserve based on market conditions with the aim of not impacting crude oil or gasoline prices, Bodman said.
Analysts said price increases may be inevitable based on history.
"The government can spin it any way they like, but the history, from the 1970s on, is very clear: During periods when the reserve is being increased, prices tend to rise," said Tim Evans, an analyst with Citigroup Global Markets.
U.S. oil prices surged on Tuesday after the department's announcement, settling up $2.46 -- nearly 5 percent -- to $55.04 a barrel.
If oil prices continue to rise, it could put the brakes on a drop in gasoline prices U.S. drivers have enjoyed at the pump in recent weeks.
(Additional reporting by Caren Bohan)