US halts new shipments to strategic oil reserve
WASHINGTON (AFP) — The United States is halting shipments to its strategic oil reserve for the second half of the year after Congress passed a bill calling for the suspension, the Energy Department said Friday.
As oil prices hit new highs near 128 dollars a barrel, the Energy Department announced it had not signed a six-month contract for deliveries to the US Strategic Petroleum Reserve (SPR), the world's largest stockpile of government-owned emergency crude oil.
The decision affects up to 13 million barrels of crude oil, the department said in a statement.
President George W. Bush, who had resisted lawmakers' calls for the suspension, will not veto the bill, White House spokesman Scott Stanzel told AFP.
"The president has indicated he doesn't believe halting the moderate fill of the Strategic Petroleum Reserve will have a meaningful impact on prices," Stanzel said.
"Congress has indicated this is something they want to try and the president will not veto this legislation."
Energy Department spokeswoman Megan Burnett told AFP that the US fills its reserve by about 70,000 barrels per day, an amount that "doesn't have an appreciable action on prices."
She said the 70,000 barrels of crude represents less than one-tenth of one percent of global daily consumption.
The decision affects deliveries of crude oil beginning in August and continuing through December.
The oil futures market shrugged off the announcement.
On Tuesday, Congress voted to suspend the filling of the reserve amid growing anger and frustration among Americans about higher energy prices that are pushing up food prices and the cost of gasoline at the pump.
Gasoline prices on Friday struck a record high average of 3.79 dollars a gallon (3.8 liters), according to the Automobile Association of America.
White House spokesman Stanzel said the president hopes the suspension would not "distract" lawmakers "from taking up measures that would improve our energy standing for the future, like expanding energy production in an environmentally sensitive way."
Burnett explained the Energy Department decided it should not sign bids received Tuesday for a contract for the July-December period because Congress had approved the legislation to suspend the SPR shipments.
The bill, which passed both the House of Representatives and Senate by veto-proof margins, suspends the filling of the reserve as long as the price of crude oil remains above 75 dollars per barrel.
Separately, House speaker Nancy Pelosi called the suspension "a critical first step for America's families, businesses and our economy.
"It makes no sense to buy oil and put it in the ground when prices are at record highs," the opposition Democrat said.
The Energy Department announcement came as Bush was in Saudi Arabia, pressing the oil-rich kingdom to increase output to cool prices.
Global oil supply is balanced with demand and market fundamentals are sound, Saudi Arabia's oil minister, Ali al-Nuaimi, told reporters as Bush held talks with King Abdullah, while crude prices continued to rocket.
"Supply and demand are in balance today ... The fundamentals are sound," "How much more can we do," asked Nuaimi, whose country is the world's top oil exporter.
Created in the aftermath of the 1973-1974 oil embargo, the SPR provides protection against a disruption in commercial oil supplies that would threaten the US economy, as well as furnishes a national defense fuel reserve.
It also allows the United States to meet part of its International Energy Agency obligation to maintain emergency oil stocks.
The inventory as of Friday was 702.7 million barrels, providing a 58-day safety net in case of supply disruptions. The SPR has a capacity of 727 million barrels.
The federally owned oil stocks are stored in huge underground salt caverns along the coastline of the Gulf of Mexico.
After the 2001 terrorist attacks, President George W. Bush raised the reserve by more than 30 percent.
