Market watch, Sept. 22
International energy futures prices plunged Thursday with a plea by Vice-President Al Gore for President Bill Clinton to tap the US Strategic Petroleum Reserve (SPR) in an effort to drive down US energy prices prior to the November election. The market sell-off escalated as US Energy Sec. Bill Richardson indicated that Clinton was seriously considering releasing oil in blocks of 5 million bbl from the emergency reserve.
International energy futures prices plunged Thursday with a plea by Vice-President Al Gore for President Bill Clinton to tap the US Strategic Petroleum Reserve (SPR) in an effort to drive down US energy prices prior to the November election.
The market sell-off escalated as US Energy Sec. Bill Richardson indicated that Clinton was seriously considering releasing oil in blocks of 5 million bbl from the emergency reserve.
The November contract for benchmark light, sweet crudes dropped $1.24 to $34/bbl on the New York Mercantile Exchange, while the December contract was down 94� to $33.41/bbl. Both contracts continued their downward slide in after-hours electronic trading to $33.70/bbl and $33.20/bbl respectively.
The October contract for home heating oil dropped 1.9� to 99.89�/gal on the NYMEX, and unleaded gasoline for the same month was down 0.05� to 98.4�/gal. The natural gas contract for October lost 3.1� to $5.29/Mcf.
In London, Gore's proposal caused a sharp drop in morning trading on the International Petroleum Exchange, with North Sea Brent crude down by nearly $2/bbl at one point. However, that market rebounded somewhat, with the November contract for Brent closing at $32.73/bbl, down $1.01 for the day.
The October natural gas contract lost 7�, closing at the equivalent of $3.38/Mcf on the IPE.
On the Singapore exchange, the November contract for Brent crude fell $1.01 to $32.73/bbl, and the December contract dropped 83� to $32.42.
The average price for OPEC's basket of seven crudes dropped $1.32 to $31.25/bbl Thursday.
Opponents instantly assailed the proposal by Gore, the Democratic presidential nominee. Treasury Secretary Lawrence Summers and Federal Reserve Chairman Alan Greenspan said such a release would be "a major and substantial policy mistake."
Rep. Tom DeLay, (R-Tex.), the House majority whip, accused Gore and Richardson of playing politics with a national security asset. He said, "The president should not tap the SPR just to give a campaign boost to his vice-president and his wife."
Hillary Clinton is running for a Senate seat in New York.
Although Clinton and Gore would like to blame high energy prices on the oil industry and the Organization of Petroleum Exporting Countries, that argument "rings hollow," DeLay said.
The Clinton-Gore administration increased US dependence on foreign oil by refusing to open more federal land to domestic exploration, he said.
Moreover, DeLay pointed out that tapping the SPR would not lower home heating oil prices, since US refineries are now producing that fuel at full capacity.
The current energy problem "has been a long time coming, and it cannot be remedied overnight," said officials at the American Petroleum Institute. "The Strategic Petroleum Reserve was established by Congress to address supply disruptions. It was not intended, and should never be used, to manipulate prices. In the long run, our country is best served by a comprehensive energy policy, something which has been absent for a number of years."
Nevertheless, many traders believed that a release of emergency oil reserves soon would be forthcoming.