WASHINGTON May 23 A Trump administration plan
to sell off half the U.S. emergency crude oil stockpile to help
balance the budget faces opposition in Congress, with lawmakers
from both parties worried the proposal would undermine the
drilling industry and make the country vulnerable to supply
The White House's 2018 budget proposal, sent to Congress on
Tuesday, proposes raising nearly $16.6 billion by 2027 by
gradually selling millions of barrels from the reserve, which
now holds about 688 million barrels of oil in underground
caverns in Texas and Louisiana. News of the proposal had briefly
sent oil prices tumbling on concern it would oversupply the
market, but prices recovered and finished slightly higher on
hopes that OPEC and other countries would extend supply cuts.
"We should not be selling oil from the Strategic Petroleum
Reserve now," said Senator John Hoeven, a Republican from North
Dakota, a leading oil producer state. "We should use the SPR for
emergencies, and selling now would disrupt the markets."
The SPR sell-off plan is part of a broader White House
proposal to balance the U.S. budget that is meant as starting
point to debate policy with Congress - which will ultimately
pass its own version.
Whether the SPR proposal will survive the budget process
could depend in part on Republican Senator Lisa Murkowski of
Alaska, a member of the appropriations committee and the head of
the chamber's energy panel. In 2015, when Congress was
considering selling a modest amount of oil from the reserve to
help fund a transportation bill, Murkowski opposed the idea,
saying the reserve should not be used as an ATM.
Murkowski did not directly address the SPR plan in a
statement on Tuesday, but she said "a President's budget is more
of a vision than anything else." Efforts to reach Murkowski on
Tuesday were not successful.
Murkowski's Democratic counterpart on the energy panel,
however, raised concerns that liquidating half of the reserve
would run counter to the original purpose of the facility, which
Congress created in 1975 to protect against global oil
disruptions that could harm the U.S. economy.
"We are not going to let Donald Trump auction off our energy
security to the highest bidder," Senator Maria Cantwell of
Washington said in an email.
The Arab oil embargo of the early 1970s led to chaos at U.S.
filling stations and fears of long-term damage to the economy.
Much has changed since then: U.S. oil production has surged
in recent years and supply from Canada has increased, displacing
a large portion of the imports from some less stable Middle
U.S. oil imports from the producer group OPEC have fallen to
less than 3.2 million bpd in 2016 from more than 5.4 million
barrels per day in 2008, according to the U.S. Energy
Richard Newell, a former head of the EIA, noted that the
plan could cause the United States to break its obligation as a
member of the International Energy Agency to hold 90 days’ worth
of oil imports on reserve. Currently, the SPR holds about 145
days’ worth of oil imports.
"There are a number of possible scenarios under which
reducing the SPR to the levels proposed would violate our IEA
treaty obligations," he said.
JOBS AND SECURITY
Lawmakers from both parties also said releasing oil from the
SPR could dampen crude prices and hurt drilling companies still
recovering from a price crash in 2014. Trump had campaigned on a
promise to revive the drilling industry.
"Putting that much oil on the market, you will see a lot of
layoffs in the energy business," said Representative Gene Green,
a Democrat from Texas.
Mick Mulvaney, the head of the Office of Management and
Budget told reporters on Tuesday, however, there are ways to tap
the SPR slowly and "telegraph it over the course of time" to
avoid having a dramatic impact on prices.
Representative Pete Olson, a Texas Republican, said the SPR
infrastructure needs improvement because tanks and other
equipment are constantly exposed to corrosive salt air. But he
did not rush to embrace a sell-off of oil, saying that the
larger budget deserves careful scrutiny.
Some oil industry representatives also came out against the
proposal. Randall Luthi, President of the National Ocean
Industries Association said the plan to cut the SPR in half
threatened national security. He added he also opposed a
proposal in the budget to cut federal oil royalty payments to
U.S. Gulf Coast states - funds meant to help them defend their
coasts from hurricane damage.
(Reporting by Timothy Gardner, additional reporting by Roberta
Rampton; editing by Richard Valdmanis and David Gregorio)