Rising US oil prices blamed on reserves policy

FT.com ^ | 2/16/04 | By Carola Hoyos

[Tribune7]

Two US senators have accused the Bush administration of driving up already high oil prices by its policy of filling up the country's strategic oil reserves.

Carl Levin, a Democrat from Michigan, and Susan Collins, a Republican from Maine, wrote a letter at the weekend urging Spencer Abraham, the energy secretary, to suspend plans to fill up the Strategic Petroleum Reserve (SPR) to "help provide American consumers and businesses with urgently needed relief from near-record high crude oil and energy prices".

With oil prices in the mid $30-range and commercial stockpiles at record lows, high petrol prices this summer could become a factor in President George W. Bush's re-election.

The two senators argue that filling the SPR at such high oil prices costs taxpayers "hundreds of millions of dollars" and that, according to the Air Transport Association, it adds up to $6 a barrel, or nearly 20 per cent, to the US oil price. The letter also quotes the economist Philip Verleger as estimating the extra cost at $8.

Other economists are less certain that the policy is having such a strong affect on oil prices.

Nevertheless, Adam Sieminski, analyst at Deutsche Bank, points out that filling the SPR reduces the amount of barrels in the market and contributes to the reluctance of commercial buyers to fill their inventories.

The administration argues that filling its emergency reserves by 2005 is a security measure to avoid shortages. But it is a policy that pits it directly against the Organisation of Petroleum Exporting Countries - in particular Saudi Arabia, its largest and most influential member.

Opec last week pledged to reduce its output by as much as 10 per cent because of the expected drop in demand as the northern hemisphere's winter subsides. The cartel's move was also intended to keep commercial inventories as low as possible to maximise its control of the market. Ali Naimi, Saudi Arabia's energy minister, argued that Opec had proven it was a reliable source of oil and that it, not consuming countries, should harbour inventories.

He said in an interview with the Middle East Economic Survey: "This hype about building strategic reserves threatens the price in one form or another. Every time the owners of strategic reserves start talking about using it for regulating price, that is a concern to us. So we are concerned about the building of these reserves."

After Opec's decision, Mr Abraham said: "The US is not going to go around the world begging for oil."

William Ramsay, deputy executive director of the International Energy Agency, the developed countries' energy watchdog, agrees: "We don't think the market can be managed from the Gulf."

[Tribune7]

Well, that explains it.

[Tribune7]

ping

[Tribune7]

One more point. This would not be as expensive or difficult if ANWR was open.

[mewzilla]

We're at war and these morons want to crack the SPR to score some short-term political points. Charming.

[2banana]

Two US senators have accused the Bush administration of driving up already high oil prices by its policy of filling up the country's strategic oil reserves.

Are not these the same oil reserves that Clinton drained in a mostly symbolic gesture to keep oil prices low so that he could win re-election? The same oil reserves that are supposed to be used for our military in times of war?

[raloxk]

i think definitely filling the SPR is responsible for some of the high price of oil, but not $6-$8. More $2-3. They are only putting about 100,000-200,000 barrells per day on average into the SPR.

[aShepard]

Hey RATS, don't get your shorts all twisted up.
We're just storing oil that Halliburton stole from Iraq, and that was the real reason for the war.
It's all for the children doncha know!

[raloxk]

yes

[maestro]

A better read would be,......

Rising US oil prices blamed on the U.S.A. lack of National (Domestic/vested interest) Refineries....

Which would provide the Lowering of prices for U.S. citizens.

'Go Brits/EU'

/sarcasm

[Tribune7]

The more you hear the more you despise Dems. Of course, the 40 percent of this country that gets its news from the establishment will never understand what really is going on.

[mewzilla]

It's supply and demand. If they really want to do us a favor, they should federal fuel taxes. But you can bet I won't hold my breath waiting for that to happen.

[KC_Conspirator]

That is a great part about ANWR. Also remember it was Klinton who depleted the reserves in the first place years ago when he released them to artificially keep prices down for Algore's election.

[Condor51]

Are not these the same oil reserves that Clinton drained in a mostly symbolic gesture to keep oil prices low so that he could win re-election? The same oil reserves that are supposed to be used for our military in times of war?

---

Yes they are.
But as I recall Clinton did it to help Gore get elected, not himself re-elected. He was trolling for votes in the NE during a serve cold snap and rising heating oil prices.

[Iron Matron]

The amount of oil in strategic reserves have nothing to do with oil prices or prices at the pump.

When OPEC decides to cut back 1 million barrells a day, to KEEP the PRICE UP, thats when the price goes up.

This is called being dependant on ARAB OIL. It's called allowing the Middle East to set out energy prices.

Has nothing to do with GWB.

[upchuck]

(Partial) Solution: Drill ANWAR and the Gulf of Mexico.

It figures that a RAT and a RINO would be raising hell about this.

BTW, does anybody know the approximate gross profit a gas station makes on a gallon of gas?

[panaxanax]

Many years ago I worked at a gas station and the owner told me he made only a few cents profit per gallon. It was the volume that kept him in business.

[Temple Owl]

But, we must save the moose. Did your sister eat the cheese?

[Eva]

Well, if the oil prices are not going down, when exactly would these Senators like us to fill them. Oh, you say that they don't want the reserves filled because they like the US at the mercy of OPEC? I see.

[Abcdefg]

I seem to remember that. And a story of a Jesse Jackson protege who got a peice of that pie. He was a loser who lived with his mom and came into several million dollars as a cut.

[Lael]

The administration argues that filling its emergency reserves by 2005 is a security measure to avoid shortages. But it is a policy that pits it directly against the Organisation of Petroleum Exporting Countries - in particular Saudi Arabia, its largest and most influential member.

BINGO!!!

Operation Iraqi Freedom [Saudi; Syria; Lebanon; Iran; Afganistan{redux}] to begin January 21, 2005.

Take THAT to the Bank!!!