WASHINGTON—One week after the U.S. Senate voted to temporarily suspend the acquisition of petroleum for the United States Strategic Petroleum Reserve (SPR), President George W. Bush officially signed a bill into law, which temporarily suspends the acquisition of crude oil for the Strategic Petroleum Reserve (SPR).
The bill, H.R. 6022, the Strategic Petroleum Reserve Fill Suspension and Consumer Protection Act of 2008, was initially presented as an amendment to S. 2284, The Flood Insurance Reform and Modernization Act of 2007, and passed in the Senate by a 97-1 margin and in the House by 385-25.
According to a various media reports, oil deliveries to the SPR will be on hold until crude oil prices fall below $75 per barrel for more than 90 days. The objective of the SPR is to provide a supply of crude oil if a national security crisis or event were to occur. Approximately 70,000 barrels of oil are stored underground in the SPR on a daily basis, and the SPR is currently 97 percent full.
The Department of Energy said earlier today that it will not sign contracts this year for the receipt and transportation of up to 13 million barrels of crude oil into the country’s SPR sites. It added that the SPR has a capacity of 727 billion barrels and since the start of the Bush Administration, its inventory has increased from 540 million barrels to its current level of 702.7 million barrels of oil stored in the underground salt caverns along the Gulf Coast of Louisiana and Texas.
The SPR, according to the Associated Press, is 97 percent full, and its current stockpile, is currently sufficient to cover two months of oil imports and is kept as a cushion in case of a major disruption of oil supplies.
Although President Bush did sign the bill, it is apparent that the White House does not endorse it.
"He remains against it," Deputy Press Secretary Scott Stanzel told the AP. "I think he saw the overwhelming numbers of members of Congress who want to attempt to have an impact on prices by stopping the fill of the Strategic Petroleum Reserve."
With diesel presently at $4.539 per gallon according to the Oil Price Information Service, and oil approaching $130 per barrel, energy prices are hitting new records on a near daily basis, which is having a negative subsequent effect on things like the economy and consumer goods spending.
But the White House maintains that that not adding oil to the SPR will not have a meaningful impact on prices.
And a recent CNN report said that estimates for how much money this law will save at the pump ranges from a few cents to $0.25 per gallon. It added that the U.S. Energy Information Administration predicts oil prices would fall only by roughly $2 per barrel—or 4 to 5 cents a gallon if SPR deliveries cease.
Even through it appears that politicians have good intentions to lower fuel costs, some industry experts contend that this law may not deliver what it promises.
“The purpose of the Strategic Petroleum Reserve is to assure adequate supply—to prevent long lines at fuel pumps—and not to hold down fuel prices,” said James Haughey, chief economist for Reed Construction Data (a corporate sibling of LM), in an interview. “If it is used to subsidize prices for fuel buyers it will not be there when it is needed to during a shortage of supplies at any price.”
Haughey added that politicians understand that stopping the small amount of crude oil put in reserve will have a negligible impact on fuel prices but he explained that they hope it will have a big impact on their vote counts later this year.
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