Record Gas Prices Demand a Temporary Release of Oil from the Strategic Petroleum Reserve
To combat record gas prices at $4.03 a gallon, on July 24, 2008, the House voted on the Consumer Energy Supply Act, H.R. 6578, to temporarily release nearly 10 percent of the oil from the government’s stockpile (known as the Strategic Petroleum Reserve (SPR)), and replace it later with heavier, cheaper crude oil. This could bring gas prices down, strengthen our national security, and be a good deal for the American taxpayer. The measure received strong majority support with a vote of 268 to 157, but failed to receive the two-thirds necessary to pass under suspension of the rules.
Watch Speaker Pelosi speak in support of the legislation>>
The SPR has been tapped or suspended before by President Bush, President Clinton, and the first President Bush and each time oil has been released the impact on prices has been dramatic and immediate. In 1991, oil prices immediately dropped by 33 percent. The 2000 exchange drove oil prices down by 19 percent. And the release by President Bush in 2005 resulted in a 9 percent drop.
The Strategic Petroleum Reserve is currently more than 97 percent full – the highest level ever – with enough oil to meet our national security needs, and the legislation requires that the reserve be kept 90 percent full. We have more oil in SPR than we did at the beginning of the Iraq War and more than in 2006 (706 million barrels today vs. 624 in 2003 vs. 688 million in 2006) when the President deferred deliveries stating, “Our Strategic Reserve is sufficiently large enough to guard against any major supply disruption over the next few months.” [President Bush, 4/25/06]
To strengthen American national security, the bill reforms SPR to maximize protection for the nation’s energy supply, by making the SPR supply more compatible with U.S. refinery capacity, as recommended by the GAO and the Department of Energy. Right now, the 11 refineries on the Gulf Coast can only process heavy crude – yet the SPR does not have any heavy crude if there is stoppage of heavy oil imports. “To address the compatibility issues of the eleven heavy crude refiners and provide full protection for the Nation for all disruption scenarios, the SPR would need for approximately 10% of its inventory to be heavy oil.” [Energy Department, 12/2005] With hurricane season here, this action will ensure that our Gulf Coast refineries are filled to capacity.
It is also good deal for the American taxpayer. It will potentially raise over $750 million in revenues by exchanging more than 70 million barrels of light sweet crude oil for more than 70 million barrels of heavy crude – which is currently $12 per barrel cheaper than light crude. That money deposited in the SPR Account could be used to increase the total inventory in the Strategic Petroleum Reserve -- further strengthening our energy supply against potential disruptions – as recommended by the Bush Administration.
This bill to bring down gas prices is another step to chart a New Direction for a greener, more affordable and less oil-dependent future to expand our economy and make us more secure -- instead of continuing the Bush-Cheney ‘drill only’ energy policy that has brought us $4 a gallon gasoline.
Bill’s Provisions:
- Require the Secretary of Energy to sell or exchange at least 70 million barrels (or 10% of current capacity) of light crude from the SPR for heavier, less expensive crude, as recommended by the Government Accountability Office. The sale or exchange must be completed within 6 months, under the bill.
- Require at least 20 million barrels of this oil be sold or exchanged within the first 60 days -- to ensure that DOE releases some light crude as soon as possible, without paving the way for market manipulation by telegraphing the specific timetable to energy speculators.
- Require the department to wait to buy the heavy crude to replace the light for at least six months from enactment and require it be completed within 5 years.
- Proceeds from the sale would be deposited into the Strategic Petroleum Reserve Account.
- The bill is supported by the Air Transport Association, American Truckers Association, Sierra Club and the Center for American Progress Action Fund.