WASHINGTON, DC�Two US senators are urging the Clinton administration to pledge to draw down the Strategic Petroleum Reserve unless the Organization of Petroleum Exporting Countries increases production quotas at its June 21 meeting.
Sens. Charles Schumer (D-NY) and Susan Collins (R-Me.) wrote US Energy Sec. Bill Richardson Tuesday, urging him to tell OPEC that the US would consider oil swaps from the 569 million bbl SPR. They asked Richardson "to make clear to OPEC ministers that, should they fail to honor their commitment to produce sufficient amounts of oil to ensure reasonable global prices, the US is prepared to release oil from the SPR to protect our consumers and our economy.
"With global demand projected to outpace supply by nearly 250,000 b/d in the third quarter of 2000 and by more than 1.7 million b/d by the fourth quarter, we once again face the likelihood of sky-high gas prices and significant pressure on our overall economy. As things stand right now, $2/gal gasoline this summer seems almost certain," the letter said.
"At the very least, OPEC must be compelled to uphold its agreement to increase supply should the price of oil exceed $28/bbl for a period of 20 days. The price has been fluctuating between $28 and $31 for 18 days now; should OPEC fail to act on its commitment to moderate the oil market, the US must be prepared to respond by releasing oil from the SPR through a swaps policy.
"We cannot allow our economy to be held hostage by foreign oil producers. We have the perfect tool to leverage OPEC's influence on the global oil economy, and the time to use it is now."
The senators said, under the swap program, oil companies would be allowed to draw down SPR crude and repay it with larger volumes later, the difference being the amount of oil that oil companies bid. The senators say the swap program could be used to gradually build the SPR to 1 billion bbl.
"Getting the SPR to 1 billion bbl, along with a viable swaps policy, would go far toward protecting the US from future oil shocks based on supply shortfalls," they said.
However, SPR officials said the four SPR storage sites in Texas and Louisiana only have combined capacity of 700 million bbl.