Oil Energy Money

Republican presidential candidate John McCain has asked President Bush to stop stockpiling barrels of oil.  Mr.McCain said the current price of oil is too high for America to continue buying 70, 000 barrels a day for the Strategic Petroleum Reserve (SPR), a 727 million barrel reserve under the Gulf Coast created during the 1973 oil embargo.

“With oil at over $100 a barrel and an adequate supply in the SPR, it is time to suspend purchases,” for the rest of the year or until prices drop below $75 per barrel, said Mr.McCain.  Democratic nominees Barack Obama and Hilary Clinton initially suggested similar schemes but McCain is the highest ranking republican to concur.

Stopping purchases would reduce taxpayer money spent on speculatively over-priced oil and lead to a drop in prices due to lower demand.  Consumer Watchdog, a nongovernmental organisation, goes so far as to suggest the SPR’s current stock be sold to consumers now and restocked when market prices drop. 

Others argue that the SPR, which currently holds 698.7 million barrels of crude oil, exists not to control prices but to provide national security in case of supply disruptions. Energy Secretary Samuel Bodman said that filling the reserve is necessary to meet an International Energy Agency initiative to have enough oil reserves to ensure the daily use of 20 million barrels for 90 days by 2025.

To meet this goal President Bush has started expanding the SPR’s total capacity from 727 million to 1.5 billion barrels by 2027.  The US currently uses 21 million barrels a day and administration officials claim the SPR purchases do not affect global prices “in any meaningful way”, an understandable statement given the volume of demand by developing countries.

The last major appearance of the SPR was President Clinton’s Winter 2000 initiative to release up to 30 million barrels of crude to boost heating fuel supplies.  However, many assumed it was a ploy to boost support for then vice president Al Gore and opponents called it “irresponsible public policy and disastrous energy policy for the U.S”.  It had little effect on prices.  

Given the upcoming election, SPR may once again play a supporting part in deciding the November elections.  The most indicative quote comes from this Wall Street Journal Blog, “Earlier this week, the Energy Department warned that gasoline prices could surge above $4 a gallon this summer in some parts of the U.S. — a prediction that politicians from both parties in Washington immediately seized on to attack one another’s policies.”