WASHINGTON -- With oil flirting with the $100 per barrel mark and rumors of $3, $4 and even $5 gasoline in parts of the country, Energy Secretary Samuel Bodman on Thursday defended plans to divert oil into the federal emergency reserve. The U.S. Department of Energy announced it has awarded contracts to Shell, Sunoco and BP North America for 12.3 million barrels of oil to go into the Strategic Petroleum Reserve (SPR) starting in January. Deliveries are scheduled at a rate of 70,000 barrels a day for six months.
Some Democrats in Congress have criticized [image-nocss] the federal purchase of oil for the reserve, diverting it from commercial markets when supplies are tight and prices increasing. And presidential hopeful Senator Hillary Clinton (D-N.Y.) said in a statement on her campaign website, "I urge the president to release oil from the [SPR] and the Northeast Heating Oil Reserve to send a signal to the market and ease concerns about low crude oil stocks that are driving prices higher. I also urge the president to support legislation passed by the Senate this year that would protect consumers by making gasoline markets more transparent and making gas price gouging a federal crime.
Although he acknowledged that tight supplies likely are one reason for surging crude oil prices, Bodman, when asked about the contracts after a speech to an energy forum, said the amount of oil going into the reserve is so modestabout one-10th of 1% of global suppliesthat it won't have any appreciable impact on prices.
"It's a very modest level when compared to even the amount of oil we use in this country. It does not materially affect the price of oil," he said, according to the Associated Press. "We plan to continue filling the reserve by a modest rate."
Bodman said the administration is concerned about soaring oil prices and that he has been "in regular touch" with foreign oil ministers including those in the Organization of Petroleum Exporting Countries (OPEC) to urge more production.
"I certainly have made my views known," said Bodman, alluding to his discussions with OPEC and other foreign oil officials. "I am hopeful that we will see a response from them. Whether they respond or choose to respond is up to them and not up to me. I'm doing the best I can within the limited sets of options that we have."
Bodman said that a shortage of supply may be responsible in part for the run-up of oil prices that in recent days. Prices receded somewhat Thursday with light, sweet crude for December delivery falling slightly to just over $95 a barrel on the New York Mercantile Exchange. Crude prices moved above $98 a barrel earlier in the week.
Analysts have cited OPEC's reluctance to pump more crude and the weak U.S. dollar as among the reasons for the price surge, said AP. Last month, OPEC ministers agreed to boost production by 500,000 barrels a day beginning this month, but that seemed to have little impact on prices.
"We're very concerned [about oil prices] because...it's like an unplanned tax increase on American families," said Bodman.
The SPR, a system of salt caverns along the Louisiana and Texas coast, contains 694 million barrels of oil to be used in a supply emergency. The government is working to fill it to its 727 million barrel capacity. The companies are providing the oil in lieu of royalty payments.
Click here to view Hillary Clinton's energy plan.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.