May 12: The US Senate Energy and Natural Resources Committee will hold a hearing on S. 267, which would create a refined oil products reserve of at least 30 million bbl of transportation fuels such as gasoline and diesel as part of the Strategic Petroleum Reserve. The bill, which the committee's chairman, Jeff Bingaman (D-NM), introduced on May 5, also would give the US Energy secretary authority to order an SPR drawdown, a decision that currently rests with the president. The hearing will be held at 2:30 p.m. in Room 366 of the Dirksen Senate Office Building.
Why it matters: When he introduced his bill, Bingaman noted that when the SPR originally was set up in the 1970s, the United States was vulnerable to oil supply disruptions because its crude oil imports were growing. The country had ample refining capacity and did not import large volumes of gasoline, diesel or other oil products so SPR managers decided to stockpile only crude.
Recently, severe weather, more than foreign disruptions, have pinched US oil supplies. In the wake of Hurricanes Katrina and Rita in 2006, the nation had plenty of crude in the SPR, but parts of the country ran short of refined products because the storms knocked out Gulf Coast refineries.
"While we are more dependent on imported crude oil than ever before, we also import more refined petroleum products. When U.S. refinery operations are disrupted, imported products from other countries are required to fill the gap. This legislation would provide a needed cushion while damaged infrastructure is repaired," Bingaman said.
Similar proposals have been greeted with skepticism in the past because stored refined products can decompose more quickly than crude oil. The United States established a northeastern heating oil reserve several years ago, which might provide an indication of how one for other oil products might work.
The provision moving the SPR drawdown authority to the Energy secretary from the president "would allow SPR policy decisions to be made closer to the oil markets that the SPR serves," according to the bill's fact sheet. That's a nice way of saying they might be less political.
Contact Nick Snow at [email protected]
