U.S. Rep. Kind Calls on President to Stimulate Economy by Ceasing New Shipments to Strategic Petroleum Reserve
Reserve 95% Full; Doing So Would Free Up More Oil, Drive Down Gas Prices
Washington, D.C. –In a letter to President Bush, U.S. Rep. Ron Kind (D-WI), today urged the Administration to temporarily cease new shipments of crude oil to the Strategic Petroleum Reserve (SPR), arguing that doing so would ease the burden on consumers and stimulate the economy by helping to drive down gas prices. Despite record-high crude oil prices and an economy on the verge of recession, the Department of Energy (DOE) is continuing to receive shipments of high priced oil for storage in the SPR, taking oil off the market for consumers and costing the federal government more than one billion dollars.
“I am asking the President to take this immediate step to put more money in people’s pockets,” Rep. Kind said. “This Strategic Petroleum Reserve is already nearly 95 percent full, yet the President continues to fill it with high-priced oil, taking it off the market and helping large oil companies reap record profits by keeping prices high for consumers. By temporarily stopping the shipment of oil to the reserve, the President could help reduce oil costs, lower gasoline prices, and save taxpayer dollars. More money in consumers’ pockets is what the economy needs right now, not more record profits for large oil companies.”
The Strategic Petroleum Reserve (SPR) is the United States' emergency oil stockpile, created in 1975 after oil supplies were cut off during the 1973-74 oil embargo. The SPR is currently about 95 percent full (nearly 700 million barrels out of a total capacity of 727 million). Despite record-high oil prices, the Bush Administration has continued to fill the SPR, diverting oil out of the market. Last November, the DOE announced that it would accept 12.3 million barrels of oil for the SPR in the first six months of this year, at a rate of about 70,000 barrels per day. This is federally owned oil produced in the Gulf of Mexico and would be taken as royalty-in-kind shipments. Temporarily ceasing these deposits, as Kind recommends, could not only help drive down gas prices, but also generate billions of dollars by selling the oil rather than diverting it to the SPR.
“While the escalating cost of crude oil has made headlines for the past several years, never before have we seen as dire a situation for consumers as the one we are experiencing now,” Rep. Kind wrote in the letter. “Even the price spikes following Hurricane Katrina did not come close to the $100 per barrel oil we saw last month, yet the Bush Administration wisely responded to that crisis by temporarily suspending purchases for the Strategic Petroleum Reserve. That action was successful in providing the type of immediate, targeted relief we need now.”
The last time the shipment of oil to the SPR was temporarily suspended was following Hurricane Katrina, which contributed to a drop of about $5 in the price of crude oil following the spike caused by the storm. Prior to that, in late 2000, President Clinton authorized a “swap” of oil in which 30 million barrels were released from the SPR to alleviate the threat of a home heating oil crisis due to low inventories. After the release, according to the Congressional Research Service (CRS), spot prices fell from about $37 to $31 per barrel.
Click here to see the full text of the letter.