The Energy Department accepted bids yesterday for the sale of 17.3 million barrels of oil from the nation's Strategic Petroleum Reserve -- the largest sale ever from the stockpile but only half of the amount the Bush administration said it planned to put on the market.
Sale of the oil was part of the administration's plan to calm what were expected to be frenzied world oil markets when the Persian Gulf War began. But the outbreak of hostilities sent prices down, not up as expected, and some oil producers asked that the sale be called off to keep prices from falling further.
Bidding was brisk for the high quality crude oil offered for sale but slow for the lower quality 'sour' crude, of which there is a worldwide glut.
Energy Secretary James D. Watkins said in a statement, "We clearly must remain sensitive to the market by making available the crude oil the industry is saying it really needs, and not allowing bargain hunters to take advantage of the taxpayers, while at the same time fulfilling our commitment to the International Energy Agency's emergency response plan."
That plan, drafted in anticipation of soaring prices, required members of the agency to sell up to 2.1 million barrels a day from national stocks.
The bids accepted by the Energy Department, from 13 oil and refining companies, were in the $27-a-barrel range, but the price the buyers pay will be adjusted according to the market price at time of delivery. The current market price is about $20. The Energy Department paid an average of $27.26 a barrel for the 585 million barrels of oil it bought for the stockpile during the past decade.