By OGJ editors
WASHINGTON, DC, Dec. 26 -- House Energy and Commerce Committee Chairman Billy Tauzin (R-LA) said the George W. Bush administration should release crude oil from the Strategic Petroleum Reserve because of current international oil market conditions.
In a Dec. 20 letter to Sec. of Energy Spencer Abraham, Tauzin cited the general strike in Venezuela, aimed at ousting Venezuelan President Hugo Chávez, as a key reason US policy makers should consider tapping the stockpile now.
Since the strike began Dec. 2, Venezuela's oil output has fallen to less than 300,000 b/d from 3 million b/d previously produced, creating supply constraints at Gulf Coast refineries designed to process only heavy oil that is imported primarily from Mexico and Venezuela (OGJ Online, Dec. 20, 2002).
"The situation is acute. At least two of those refineries, which account for approximately 10% of the market for refined products, will run out of crude oil by the end of the month," Tauzin said.
The Louisiana lawmaker said that if those two refineries run out of crude feedstock, it would create a situation that satisfies the regulatory test policy makers routinely use when they consider an SPR release. That test includes a circumstance that "constitutes, or is likely to become, a domestic...supply shortage of significant scope or duration" (42 USC 6241(h))."
Tauzin said, "Thus, it appears that supplies of crude oil from the Strategic Petroleum Reserve could lawfully be used to 'assist directly and significantly in preventing or reducing the adverse impact of such shortage' as defined in the statute. Additional statutory criteria are met as well, namely the threshold of 500 million bbl of crude oil stored in the Strategic Petroleum Reserve."
He added, "I respectfully request that careful consideration be made as to the economic consequences caused by the lack of crude oil supply from Venezuela."
DOE has resisted calls to release SPR crude because of the situation in Venezuela. Industry observers predict the White House may face stronger pressure to release oil if the US goes to war with Iraq.
Another consideration for US policy makers will be to determine how resolved are members of the Organization of Petroleum Exporting Countries in keeping the cartel's "price band" maximum of $28/bbl.
Even if market conditions improve, President Bush can authorize an SPR release if he determines it is in the national interest to do so. Congress over the past 2 decades has authorized SPR sales for both supply and budget reasons.