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UPDATE 1-U.S. to study petroleum reserve in light of climbing output
October 20, 2014 / 9:07 PM / 3 years ago

UPDATE 1-U.S. to study petroleum reserve in light of climbing output

(New throughout, adds details from report)
    WASHINGTON, Oct 20 (Reuters) - U.S. officials will examine
how to boost efficiency of the Strategic Petroleum Reserve (SPR)
now that domestic energy production is booming, according to a
letter from a Department of Energy official.
    "DOE believes that a broad, long-range strategic review of
the SPR needs to be accomplished," Christopher Smith of the DOE
Office of Fossil Energy, wrote to the Government Accountability
Office. In the letter, sent on Sept. 17 and released on Monday,
Smith wrote that the DOE, steward of the SPR, has started the
process to conduct the review. 
    The DOE will examine the program in light of gains in U.S.
output and market changes, the letter said.
    U.S. oil output from energy patches like North Dakota's
Bakken region has surged in recent years. As oil imports shrink,
the country may need to store less oil in case of emergencies.
The SPR, designed to hold 727 million barrels, currently holds
about 690 million barrels.
    The GAO, an investigative arm of Congress, released the
letter as part of a broader federal review on the domestic oil
bonanza. The GAO also asked whether the 40-year-old ban on crude
exports is still in the national interest.
    "Increased domestic crude oil production and falling net
imports may affect the ideal size of the SPR," the GAO report
said.
    The SPR currently holds more oil than required by
international agreements. As part of U.S. membership in the
International Energy Agency, the country must maintain reserves
of at least 90 days worth of net imports.
    As of May, the SPR held 106 days and private industry held
141 days, the report said.
    In recent months, other officials have questioned the
effectiveness of the SPR, conceived after a global oil crisis in
the 1970s.
    In July, an internal DOE report concluded that delayed
maintenance of the SPR meant it would not be able to answer a
domestic demand for fuel as envisioned. 
    
    
    
    The GAO report also weighed the benefits of relaxing the
U.S. crude export ban, also enacted in the 1970s. Allowing more
domestic fuel to reach global markets would probably boost the
national economy and ease the U.S. trade deficit but the
environment could be harmed, according to the report.
    "Increased crude oil production may increase greenhouse
gases and other air emissions," the report found. "In addition,
removing export restrictions may affect water quality."
    "Removing crude oil export restrictions is likely to
increase domestic crude oil prices but decrease consumer fuel
prices," said the GAO report, which drew from both independent
and industry-funded studies.
    It cited several reports as saying that ending the export
ban could ease U.S. prices at the pump by anything between 1.5
to 13 cents per gallon. The GAO report said benefits of lower
fuel cost would be spread unevenly, with the Midwest and
Northeast possibly facing slightly higher prices due to market
disruptions.
    The report did not specify which regions might see lower
prices.

 (Reporting by Patrick Rucker and Timothy Gardner; Editing by
Lisa Von Ahn and David Gregorio)

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