Energy Dept. sets aside more oil
By H. JOSEF HEBERT
Associated Press Writer
WASHINGTON - The Energy Department said Friday it would continue putting oil into the Strategic Petroleum Reserve even as crude oil prices remain above $100 a barrel.
The department announced a solicitation of bids for 13 million barrels of oil, with deliveries expected to begin in August, when the current delivery contracts expire. Oil will be put into the reserve at about 76,000 barrels a day, about the same rate as current deliveries, through December.
Bids are due by May 13, the department said.
The government reserve, which was created to serve as a cushion against major oil supply disruptions, has a capacity of 727 million barrels. It now holds about 700 million barrels.
The administration's policy of diverting oil into the government reserve at a time of high prices has been criticized by some congressional Democrats. Sen. Byron Dorgan, D-N.D., has urged a suspension of deliveries to the reserve.
"Not only are taxpayers being fleeced by paying that much for oil, but the effect of taking valuable oil, like sweet crude oil, off the market has a disproportionate effect on oil prices," Dorgan has argued.
Energy Department officials have countered that the amount of oil being put into the reserve is too small to affect the oil markets, which globally consume 86 million barrels of oil a day.
The department isn't buying the oil directly. It takes oil in lieu of royalty payments on oil pumped from public lands. That oil is then traded for the type of crude needed for the reserve and delivered by the contracting company. The reserve is on the Gulf Coast.
The department also has left open the possibility of spending $584 million later this year to repurchase oil sold from the reserve in 2005 because of supply disruptions caused by Hurricane Katrina.
Two years ago, President Bush temporarily halted the delivery of oil into the reserve as part of a plan "to confront high gasoline prices" as the summer driving season was about the begin.
"When supplies are tight, every little bit counts," the White House said at the time. No shipments to the reserve were made from May 2006 to April 2007.
Weekly average gasoline prices during that period generally remained under $3 a gallon, dipping to $2.16 a gallon at one point, according to Energy Information Administration figures.
On Friday, light sweet crude oil was as high as $106 a barrel and retail gasoline prices surged to a new record of $3.30 a gallon.