One topic analysts hope the White House does not neglect in its upcoming interagency task force report is the US Strategic Petroleum Reserve. The SPR has been a $20 billion pawn in budget battles and presidential elections. But a new report released by a bipartisan group sponsored by the James Baker III Institute for Public Policy and the Council on Foreign Relations, calls on the administration to, "as an early priority, define publicly its general policy for using SPR crude."
SPR is one of several energy issues tackled in the 100-page manifesto that lists oil company CEOs, academics, consumer groups, and government officials as members.
More oil
One of the White House's top priorities should be to add more oil to the 567 million bbl reserve, report authors suggested. The SPR is now about 80% full, and its size has declined both as a share of imports and in absolute terms since the mid-1990s. At its peak, the SPR covered more than 80 days of imports; today it covers under 50 days. President Geroge W. Bush's latest budget plan does not earmark money to buy crude, but it does provide a budget for the stockpile's upkeep. Yet Bush should not shy away from adding more oil uunder his own authority merely because it can be done more efficiently with Congress's blessing. In the past, bureaucratic red tape preempted quick reaction to market conditions, authors said.
And although former President Bill Clinton was criticized last fall when he leased oil to companies on a time-swap or exchange basis, the practice still has merit when done in a proactive rather than reactive manner, report authors said.
Clinton's election year-inspired scramble to address winter heating worries was "badly managed," because the US Department of Energy released oil to inexperienced buyers and used the exchange as a quick market fix to offer brief price stability.
Congress needed
Swaps, when done slowly over time, can allow the government to monetize its crude oil reserves "which otherwise sit idly and nonproductively," the report found. And the White House should seek help from Congress to expand DOE's latitude in implementing SPR exchanges, the taskforce said. The current 30 million bbl limitation on time swaps should be "increased several-fold." That way, policymakers could take advantage of the market's forward price structure to make sure the SPR is strengthened efficiently over time, authors insist.
However, policymakers should also be aware that some lawmakers feel that managing the SPR this way theoretically reduces the amount of oil available in an emergency. Extended time swaps may also put physical limitations on the SPR salt domes, the report cautioned.
The Bush administration may be listening already. Last month, DOE said it would allow five companies to delay refilling about 80% of their SPR crude contracts made under a Clintonadministration-era swap arrangement (OGJ Online, Mar. 29, 2001). About 24 million bbl of oil "borrowed" last fall may now be returned from December of this year through January 2003. In return for the delay, the DOE will receive an additional premium of 2.4 million bbl. Another method the White House is mulling to boost SPR oil is to dramatically expand the stockpile with oil produced from federal leases.