Feb. 26: The Senate Energy and Natural Resources Committee will hold a hearing to examine US oil inventory policies, including the Strategic Petroleum Reserve. Invited witnesses include Frank Rusco, acting director, natural resources and environment director at the Government Accountability Office; Katharine Fredriksen, principal deputy assistant secretary in the Department of Energy's Office of Policy and International Affairs; Frank Verrastro, director and senior fellow in the Energy and National Security Program at the Center for Strategic and International Studies, and Melanie Kenderdine, associate director of strategic planning at the MIT Energy Initiative. The hearing will begin at 10 a.m. in Room 366 of the Dirksen Senate Office Building.
Why it matters: Several of the committee's members have questioned the Bush administration's continued purchases of crude oil to fill an expanded Strategic Petroleum Reserve. When Energy Secretary Samuel W. Bodman came before the committee on Feb. 6 to discuss the Department of Energy's proposed Fiscal 2009 budget, Chairman Jeff Bingaman (D-N.M.) expressed concern that the costs of expanding the reserve outweigh the benefits.
"In this budget, the administration is proposing to spend $584 million to buy millions of barrels of crude oil and take them off the market. It seems odd to be spending a half-billion taxpayer dollars on an activity that will help keep oil prices high," Bingaman told Bodman.
That same day, committee member Byron L. Dorgan (D-N.D.) introduced a bill which would direct Bodman to temporarily suspend SPR purchases when crude prices are near record levels. The federal government would stop its purchases of more than 50,000 bbl of crude a day for the rest of 2008 or until the price fell to $50/bbl or less if the bill became law, Dorgan said. "We need to use a little common sense here. I believe maintaining the current reserve is important for our economy and national security, but the time to stock up is not when prices are highest," he maintained.
The underlying issues go beyond continuing to buy crude for the SPR when prices are high. The SPR was established to provide a supply cushion during an emergency, yet there doesn't seem to be a clear definition of when and how inventories should be released. Following Hurricanes Katrina and Rita in 2005, there were arguments over whether the SPR should be tapped because the storms heavily damaged a significant portion of total US refining capacity. Committee members undoubtedly will press witnesses for answers to these questions as well.
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