- The Washington Times - Wednesday, February 26, 2003

From combined dispatches
Energy Secretary Spencer Abraham yesterday said the Bush administration was ready to act quickly to release emergency oil reserves if necessary to offset any disruption to Middle East supplies in the event of war with Iraq.
"We will and can act quickly to use the Strategic Petroleum Reserve to fortify efforts by producers to offset any severe disruption if it is needed," Mr. Abraham told lawmakers at an Senate Energy and Natural Resources Committee hearing.
Crude-oil prices have in recent weeks risen to two-year highs on fears that a war in Iraq, the world's eighth-largest oil exporter, could slow supplies from the Middle East, which pumps a third of the world's oil.
The United States has said it will disarm Iraq by force if necessary, despite widespread international opposition to war and concern that rising energy costs could smother a weak world economy.
The U.S. emergency oil stockpile was created in 1975 and currently has about 600 million barrels of crude oil stored in deep underground salt caverns in Texas and Louisiana.
It can be drawn at a rate of 4.3 million barrels a day for 90 days, before the rate drops as storage caverns are emptied. The government sold 17 million barrels of oil from the reserve in January 1991 at the start of the U.S. offensive in the Gulf war.
The 1991 release helped pull oil prices down to near $20 a barrel, but analysts warn that oil inventories are so low that prices would not fall as far this time in the event of a release.
U.S. crude-oil stocks have fallen to their lowest level since 1975 as a decline in imports from strike-bound Venezuela has drained supplies while sustained cold weather has stoked demand.
Heating oil and natural-gas prices have recently hit all-time highs, and analysts are warning of big jumps in gasoline prices as summer vacation driving demand heats up.
New York oil prices fell after Mr. Abraham's comments, but soon recovered to close at $36.06 a barrel.
"People are being pinched like never before by soaring gasoline and other energy prices," Sen. Ron Wyden, Oregon Democrat, told Mr. Abraham, adding that consumers "are getting hosed because they're not getting any protection."
Mr. Abraham said that any decision on releasing oil reserves would be made in consultation with fellow members of the International Energy Agency, adviser on energy for 26 industrialized countries.
But he added that the government oil stocks were established "to provide energy security … ."
"We do not believe it should be used to address price fluctuations," he said.
The head of the IEA said earlier yesterday that strategic reserves in major oil-consuming nations will only be used should producers fail to make up any supply shortfall.
"I believe the producers should act first. Reliance on strategic reserves should be a last resort," said Claude Mandil, executive director of the Paris-based IEA.
Producers in the Organization of the Petroleum Exporting Countries oil cartel have told the IEA they have enough spare capacity to meet any stoppage of Iraqi exports if there is a war.
Iraq oil exports remained steady at 1.7 million barrels per day in the week ended Feb. 21, U.N. officials said.
The IEA's Mr. Mandil said its members will expect a commitment from OPEC to cover any shortage very quickly, but could wait for weeks for firm evidence of the extra output.
Members of the IEA, formed after the Arab oil embargo in the 1970s to protect consumer nations' interests, include the United States, Germany and Japan. The IEA holds four billion barrels of reserves, equivalent to about 115 days of net imports.


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