U.S. could tap oil reserves in emergency

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U.S. could tap oil reserves in emergency By Reuters Special to CNET News.com November 26, 1999, 4:00 p.m. PT WASHINGTON--The U.S. Department of Energy says if a Y2K computer problem causes a disruption in oil supplies it is prepared to sell crude oil from the nation's Strategic Petroleum Reserve.

The DOE has drawn up emergency plans to sell oil from the Strategic Petroleum Reserve (SPR) if necessary, but a drawdown is far from definite, said spokesman Robert Porter.

Should the need arise, crude oil could be withdrawn from the U.S. emergency stockpile and moved into the market in just 15 days, he said in response to queries about the department's Y2K preparations.

"I don't want to send out alarming signals that we are gearing up for an inevitable SPR drawdown because of Y2K. But we do go through the precautionary preparations for that," Porter said.

The Y2K problem refers to concerns that older computers and their software, which use the last two digits for the year in dates, may fail to recognize 2000 or mistake it for 1900, causing a crash on Jan. 1.

The possibility of supply disruptions due to Y2K computer problems combined with oil prices hitting nine-year highs have prompted U.S. legislators to take a fresh look at the function of the SPR.

The SPR was created by Congress in the mid-1970s after the Arab oil embargo. It holds 571 million barrels of oil in underground salt caverns in Texas and Louisiana.

Last week, Sens. Charles Schumer (D-New York) and Susan Collins (R-Maine) introduced a Senate bill that would allow sales of reserve oil if prices stayed above $25 a barrel for two weeks.

"With crude oil prices now approaching levels not seen in a decade, it would be in our nation's best interests if the president would consider releasing oil from our Strategic Petroleum Reserve," the lawmakers said in a letter to President Clinton yesterday.

On Monday, energy secretary Bill Richardson said that a sharp rise in world crude oil prices and Iraq's decision to halt its oil exports were not reason enough to open the spigot on the emergency stockpile.

U.S. crude prices this week soared to the highest level since the Gulf War, topping $27 a barrel on Monday after Iraq confirmed it would halt oil exports.

Under the DOE's contingency plan, Clinton would decide whether a reserve oil sale is necessary, with recommendations from the department.

"Once the president decides a drawdown of the SPR is necessary, then from the time he makes that decision until the time we move oil into the market can be as short as 15 days," Porter said.

He declined to say what specific thresholds must be reached to trigger a department recommendation for an SPR sale.

"We would prefer not to unduly influence the market by trying to give some predefined trigger," Porter said.

Still, he said department officials will be reviewing U.S. petroleum stock levels leading up to Jan. 1 and what--if anything--happens to foreign oil supplies after that.

"We'll be looking at the whole situation as we approach Jan. 1 and the aftermath of the Y2K rollover," he said. "We'll be looking at all factors that influence the movement of oil."

For example, if supplies drop sharply during the week before New Year's from drivers rushing to fill their gasoline tanks, Porter said just the announcement of an SPR sale may be enough to reassure consumers that plenty of oil is available and the reserve sale could then be canceled.

"You could very well see the effect of an announcement being sufficient to calm markets and determine that supplies were adequate and never proceed with the actual sale," he said.

"Once you start the cycle, it does not mean that you can't stop it," Porter said. "It's not on autopilot."

A similar situation occurred at the beginning of this decade when the DOE offered to sell 33 million barrels of reserve oil when Iraq invaded Kuwait.

President George Bush announced a stockpile sale, and oil prices began to stabilize, making only 17 million barrels necessary to be sold from the reserve, Porter said.

-- rough-neck (oily-joe@small.town), November 29, 1999


Umm, that would be 15 days from decision to refiners, always assuming that the pumps in the salt domes are powered, the trucks have fuel and the refineries are running.

Night train

-- jes a slippery ol footballer (nighttr@in.lane), November 29, 1999.

Not to mention the reconfigration of the refineries to handle salt impregnated crude, no small chore that.

The Devil is in the details


-- Shakey (in_a_bunker@forty.feet), November 29, 1999.

Ah, the Strategic Oil Reserve! Billions for defense, but not one cent for tribute! >> "We would prefer not to unduly influence the market by trying to give some predefined trigger," Porter said. <<


As far as I can see, the reserve is purely political in its uses and its military use is practically nil. Increasing the reserve subsidizes oil companies and provides a way to reward those companies for political favors and contributions. Threatening to tap the reserve also provides a handy way to manipulate the commodities market in crude oil to match the needs of the current US administration (of either party).

As they say in Washington, DC, what a happy idea!

-- Brian McLaughlin (brianm@ims.com), November 29, 1999.

So Chuckie wants to sell from the SPR because the price of gas in Manhattan is between $1.50 and $2.00. I never knew NYC motorists were a STRATEGIC REQUIREMENT. I always thought continued military operations, heavy commercial transport and fuel & power production were strategic issues for this nation.

Gimme a break. If Chuck Schumer thinks gasoline price stabilization is a critical issue, let him propose establishing a national petroleum prices stabilization reserve. Maybe he could earn brownie points from the Wall Street types by starting a government funded futures market.

The SPR is a national asset intended to try and cover a disruption that would otherwise threaten the nation's continued functioning. Schumer's political grandstanding gimmick is a good example of why we've had no political leadership in Y2K.

Higher gas prices have hit voters in the wallet. Y2K hasn't hit the average schmoe's wallet yet. We're seeing politicians take action over gas prices because voters have told pollsters the higher prices hurt are the politicians fault (true or not).

The public WILL be willing to tell pollsters similar things about Y2K after they start getting hit with bills for Y2K problems or repairs. But by that time it will be too late for the pols to pose and spout off about doing something about the issue.

The Strategic Petroleum Reserve was one of the few far-sighted moves made by the US government in the last half of theis century. Doing something about Y2K before it's too late would have been the top of the list, but the politicians blew it by looking for something to get them votes today and not for the next two generations.


-- Wildweasel (vtmldm@epix.net), November 29, 1999.

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