SPR oil purchase suspension in 2008 saved $600 million, senator says

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Mar. 12 -- Legislation that suspended purchases of crude oil for the US Strategic Petroleum Reserve in 2008 saved taxpayers more than $600 million, according to Sen. Byron L. Dorgan (D-SD).

Dorgan, who chairs the Appropriations Committee’s Energy Development and Water Subcommittee, and Jeff Bingaman (D-NM), who chairs the Energy and Natural Resources Committee, cosponsored a bill that spring to halt SPR purchases at a time when oil costs were as high as $100/bbl.

The measure passed the Senate in a 97-1 vote and became law in May. It suspended SPR crude purchases through the end of 2008, when prices dropped dramatically, said Dorgan, who also is an Energy and Natural Resources Committee member.

Dorgan cited a Mar. 8 letter from the US Department of Energy’s Fossil Fuels Office that said that refilling the reserve, which had been drawn down following Hurricanes Katrina and Rita in 2005, with 19.5 million bbl would have cost the federal government $1.7 billion if purchases had continued.

When purchases resumed in January 2009, the SPR bought 10.7 million bbl at an average $51.82/bbl, a 5-year low, the letter continued. “In 2009, we calculate the combined cost of the 19.5 million bbl to be $1.1 billion, or a savings of approximately $600 million compared to what would have been incurred in 2008,” it said.

“It made no sense for the government to continue buying oil at that high price and put it underground when the [SPR] was already 97% filled,” Dorgan said.

Bingaman said, “I think the success of this initiative demonstrates that bipartisan, consensual legislation can be a good deal for our national energy security and a good deal for the taxpayers. It serves as a reminder that realistic, thoughtful and bipartisan energy legislation benefits everyone.”

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