WASHINGTON – President Donald Trump’s proposal to sell nearly half the U.S. emergency oil stockpile is renewing debate about whether the Strategic Petroleum Reserve is still needed amid an ongoing oil production boom that has seen U.S. imports drop sharply in the past decade.
Trump’s budget, unveiled on Tuesday, calls for selling an additional 270 million barrels of oil over the next decade, raising an estimated $16.6 billion. The proposal, on top of planned auctions expected over the next few years, could push the reserve below 300 million barrels by 2025. It now is at 688 million barrels.
The petroleum reserve, created in the wake of the 1970s Arab oil embargo, stores oil at four underground sites in Texas and Louisiana. The reserve guards against disruptions in the flow of oil from the Middle East and other countries, and lawmakers from both parties have long warned against using it to raise money.
But some Republicans say North Dakota’s oil-rich Bakken region offers a de facto reserve that can be tapped if needed.
“You know the world’s changed a lot,” said Rep. John Shimkus, R-Ill., a senior member of the House energy committee. “We’re one of the largest oil producers in the world.”
Asked if he was worried that Trump’s proposal could deplete the reserve, Shimkus laughed. “Not when you have North Dakota and the Dakota (Access) Pipeline,” he said.
Not all Republicans agree. The petroleum reserve “is not an ATM for new spending,” Alaska Sen. Lisa Murkowski said in 2015 as the Obama administration proposed selling off a smaller of portion of the reserve to help fund a budget agreement.
Murkowski, who chairs the Senate energy committee, was reviewing Trump’s proposal but “is generally opposed to selling off emergency oil reserves, particularly as pay-fors for unrelated measures” a spokeswoman said Wednesday.
Sen. Maria Cantwell of Washington state, the senior Democrat on the energy panel, vowed to defeat Trump’s plan.
“We are not going to let Donald Trump auction off our energy security to the highest bidder,” she said.
“The SPR exists to keep energy available and affordable in times of crisis or natural disaster, which helps low-income communities most,” said Rep. Raul Grijalva of Arizona, the top Democrat on the House Natural Resources Committee.
Selling the reserve “to pay for tax cuts for the extremely rich is especially cruel,” Grijalva said, calling the plan a “short-sighted favour to oil billionaires.”
Richard Newell, a former head of the U.S. Energy Information Administration, said 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.
Budget director Mick Mulvaney said the proposed sale would not cause a security risk, citing increased oil production from fracking and other drilling techniques that have opened up areas once out of reach.
The sales should not affect global oil prices because they would be carefully staged over a decade, Mulvaney said.
“I don’t need to take this much of your money and bury it in the ground out in western Texas someplace for domestic security and national security reasons when we have domestic surpluses like we do,” he said at a budget briefing this week.
Jason Bordoff, director of Columbia University’s Center on Global Energy Policy, warned that selling off large parts of the reserve could cause a price spike if there’s a supply disruption in Venezuela or elsewhere.
“It would be foolish to sell off this 40-year-old strategic stockpile given continued risks to global oil supply, uncertainty about the longevity of the shale revolution and historically low levels of spare capacity held by OPEC countries to cushion supply shocks,” said Bordoff, who served as an energy adviser to President Barack Obama.
Energy analyst Kevin Book said sale of the whole 270 million barrels is unlikely, given congressional opposition, but said additional sales beyond those now scheduled are probable.
Rep. Greg Walden, R-Ore., chairman of the House Energy Committee, said the reserve “made sense when we were hostage, potentially, to others. But now with a changed landscape, it calls for a review.”
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