Senate okays amendment to replenish SPR

The U.S. Senate has shelved until September a bill that would provide for the purchase of 28 million bbl of crude for the Strategic Petroleum Reserve. The Senate accepted by voice vote an oil-purchase amendment to the Treasury-Postal appropriations bill. A vote on the entire bill was delayed, for reasons unconnected with the oil purchase, until after the Senate returns from its August recess. Sens. Frank Murkowski (R-Alas.) and Jeff Bingaman (D-N.M.) offered the $420 million SPR amendment,

Aug. 10, 1998

2 min read

The U.S. Senate has shelved until September a bill that would provide for the purchase of 28 million bbl of crude for the Strategic Petroleum Reserve.

The Senate accepted by voice vote an oil-purchase amendment to the Treasury-Postal appropriations bill. A vote on the entire bill was delayed, for reasons unconnected with the oil purchase, until after the Senate returns from its August recess.

Sens. Frank Murkowski (R-Alas.) and Jeff Bingaman (D-N.M.) offered the $420 million SPR amendment, which did not require offsetting revenues because the Senate accepted it as an emergency provision.

Murkowski said, "Adjusted for inflation, oil prices are lower today than during the Depression. While that is good for the consumer, it is a nightmare for our small domestic producers. The very survival of our ability to produce oil within the U.S. is at risk."

He said the 28 million bbl would replace the SPR oil DOE has sold for budgetary purposes the past 3 years: "The U.S. government paid an average of $33/bbl for oil in the SPR. The average return when the government sold that oil was $19. Over 3 years, the U.S. taxpayer has taken a $500 million hit on those sales-sales that steadily have drained our nation's energy security insurance policyellipseOil is at its cheapest price in 30 years. Now seems like the time to strengthen our domestic energy security by adding more oil to the SPR."

The Independent Petroleum Association of America and the National Stripper Well Association noted the amendment is similar to the $500 million emergency appropriation to remove excess agricultural commodities from the world market to help U.S. farmers.

It said domestic producers recently have experienced "a price crisis of historic magnitude. From October 1997 through July 1998, crude oil prices have dropped more than $7/bbl. In many producing regions, oil producers are facing price declines of up to $10/bblellipseThe result of the price collapse is that many of the 500,000 marginal oil wells, representing 20% of U.S. production, are at risk of being permanently lost."

The groups said the average marginal oil well produces 2.2 b/d and costs $41.11/day to operate, so when oil sells for $14/bbl, the marginal well generates only $30.80 and loses $10.31/ day.