U.S. slated to sell $375 million of
emergency reserve oil this winter
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[December 10, 2016]
By Timothy Gardner
WASHINGTON (Reuters) - The U.S. government
is slated to sell $375 million worth of crude oil from the country's
emergency reserve this winter after Congress passed a temporary spending
bill on Friday that contained a measure authorizing the sale.
President Barack Obama's administration has pushed Congress to approve
an up to $2 billion plan for a revamp of the Strategic Petroleum
Reserve, a string of heavily guarded underground salt caverns along the
Gulf of Mexico filled with crude. The stash currently holds about 695
million barrels of oil.
A Department of Energy spokeswoman said authorization in the spending
bill "will allow the Department to take necessary steps to increase the
integrity and extend the life" of the reserve.
Congress passed the original funding for the reserve after the 1973 to
1974 Arab oil embargo to protect the country from global supply
disruptions that have the potential to spike domestic fuel prices and
damage the U.S. economy.
Many of the reserve's steel tanks and pumps are now rusting after
decades of being whipped by storms and exposed to salt air. A plan
submitted to Congress by the Energy Department in September said "this
equipment today is near, at, or beyond the end of its design life."
In addition, the U.S. oil boom of the last decade has reversed the
direction of many pipelines away from the reserve, making it more
difficult to get oil to market in a hurry.
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A maze of crude oil pipe and equipment is seen with the American and
Texas flags flying in the background during a tour by the Department
of Energy at the Strategic Petroleum Reserve in Freeport, Texas,
U.S. June 9, 2016. REUTERS/Richard Carson
The $375 million sale, or nearly 7.3 million barrels of oil in
today's price, is just the first planned installment. For each of
the next three fiscal years Congress would have to approve the
annual sales to reach the up to $2 billion revamp plan. It remains
to be seen whether President-elect Donald Trump would urge Congress
for the annual authorizations in the coming years.
This sale, which could take place seven to nine weeks after the
temporary spending bill is enacted, would pay for the design of the
revamp of the SPR and other pre-construction costs. Further sales
would pay for construction of new equipment and new marine terminals
to allow the reserve greater capacity to ship oil by vessels.
(Reporting by Timothy Gardner)
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