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Clinton taps emergency oil reserve
By Compiled from Times wires © St. Petersburg Times, published September 23, 2000 WASHINGTON -- President Clinton on Friday ordered the release of 30-million barrels of oil from the nation's emergency reserve amid rising energy prices, triggering charges that his highly unusual action was a political ploy intended to help Vice President Al Gore win November's election. Republican presidential nominee George W. Bush denounced Clinton's decision, which came just one day after Gore called for such action, as an imprudent move aimed at "short-term political gain." "It's a bad idea because it depletes a petroleum reserve that needs to be used in case of war or major disruption of energy supplies," Bush told reporters as he arrived for a Republican Party fundraiser in Tampa. "This is an administration that has had no energy plan," Bush continued. "Their own secretary of energy said that they got caught unawares. I believe that the vice president has made this decision, with the president's support, to achieve short-term political gain." The Strategic Petroleum Reserve was created after the 1973-74 Arab oil embargo as a hedge against disruptions in global oil supplies. Only one other president, George Bush, the candidate's father, has tapped the reserve since its creation, which he did during the Persian Gulf War when he ordered the release of 33.75-million barrels. Gore said he had no advance knowledge of Clinton's decision, and he portrayed Bush, a former Texas oil executive, as beholden to oil industry interests. White House spokesman Jake Siewert said Thursday that Gore had discussed oil prices with Clinton earlier this week. Energy Secretary Bill Richardson, who announced the move at a late-afternoon news conference, denied any ulterior motives on the administration's part. "This is not political," Richardson said. "The president wants to help the American people get home heating oil." The decision could have political impact whatever its motivation, said Gary Jacobson, who teaches political science at the University of California at San Diego. Gore can say he took steps to head off a serious energy emergency and that could appeal to voters, Jacobson said, while Bush's charge that it was purely a political move may appeal most to voters already in his camp. "Of course it's political," Jacobson said. "All politics is political. Is that a bad thing? Do you want elected officials to be responsive to you and your problems? If you thought about the purpose of elections, it's to make them responsible." Richardson, defending the decision to release the reserves, said the administration is not trying to drive down the price of oil, but is taking a precautionary step to avert a possible shortfall of heating oil this winter. However, Gore, speaking before Richardson's announcement, said home heating prices would go higher unless action was taken, making clear that consumer prices are his primary concern. "This is a matter of great urgency for the families who are being hit in the pocketbooks," Gore said during a campaign appearance in Vanport, Pa. Oil prices, which fell $1.24 a barrel Thursday after Gore's call for action, fell another $1.32 Friday to $32.68 on the New York Mercantile Exchange on expectations that Clinton would follow through on his vice president's public request. The administration held off the announcement until the market closed. Many analysts expect Clinton's action to bring crude oil prices down further, but some were skeptical of its impact on prices of heating oil, a refined distillate of crude. Most U.S. refineries are running at or near capacity. Some analysts have suggested that adding more crude oil to the mix will do little to alleviate the heating oil situation. Heating oil reserves are 19 percent lower than this time last year and are down nearly 65 percent in New England, the main region that uses oil for wintertime heat. Most analysts, however, don't expect the country to run short of heating oil this winter, although they warn that a cold snap could cause temporary jumps in its price. That's what happened last winter, causing public outcry in the Northeast as heating bills leapt. "The impact is not going to be very significant on heating oil supplies between now and when heating oil demand kicks in," said Jeff Mokychic, head analyst at Bridgeton Global Investor Services in Allentown, Pa. "This is going to pull crude oil prices down," said Gary Ross, chief executive officer of PIRA Energy Group, a New York-based energy consulting firm. "This is more than the market was anticipating." Bill O'Grady, director of futures research at A.G. Edwards & Sons in St. Louis, predicted a dramatic drop in crude oil prices, to the $25 to $27 per barrel range. That would be well within the $22 to $28 range that the Organization of Petroleum Exporting Countries says it is aiming at. "This is a very strong signal," O'Grady said. "Thirty-million barrels will put inventories back to normal." Some analysts warned, however, that OPEC, which produces 46 percent of the oil consumed in the United States, could choose to offset Clinton's move by cutting its own production. Iraq's Saddam Hussein, in particular, provokes fear in financial markets that he might withhold some of his country's 2.5-million daily barrels of oil production to increase his leverage in bargaining with Western powers. O'Grady, however, said he thinks that OPEC leaders have signaled that the group of oil-producing nations would not object to a release from the U.S. reserve. Clinton's order will release 30-million barrels of crude oil over a one-month period to refiners who make heating oil. After refining, that amount of crude can produce 3-million to 5-million barrels of heating oil, Richardson said. The 571-million-barrel reserve was established near the Texas-Louisiana border in the 1970s, during the height of an energy crisis and amid concern about the ability of foreign oil producers to dominate the world market. The United States consumes 16-million to 20-million barrels of oil a day. Under the plan, the government would add 1-million barrels per day to the supply for a month and then reassess the policy. Under the program, the oil would be loaned to oil companies, which then would sell the oil on the open market. The companies would replace the oil later, when prices drop, with more barrels than they borrowed. Energy Secretary Richardson said that because they will require refiners to give back more oil than they take out, the reserve will have more oil than it started with, enhancing national and energy security. The Energy Department will solicit bids for the oil from refiners Monday and negotiate final deals by Oct. 2. Energy officials expect refiners to agree to return more oil than they take, because the futures markets are predicting lower oil prices by the return date. The first oil could be delivered as soon as mid-October, the officials said. All 30-million barrels must be taken out of the reserve by the end of November. Even before the move, oil had been a major campaign issue. Gore is an ardent environmentalist and author of Earth in the Balance, which warns of impending oil crises and calls for the elimination of the internal combustion engine in automobiles. With oil prices low for most of the Clinton-Gore administration, Gore made little progress in his effort to cut oil consumption. But this year, world demand has soared, pushing oil prices to their highest level in a decade and returning energy policy to the forefront of the national agenda. Bush and his running mate, Dick Cheney, are both former oil men, with Cheney having run a worldwide oil-related company called Halliburton Corp. Gore has portrayed Bush and Cheney as protectors of the oil industry and thus unconcerned about cutting oil prices. The Republican presidential team has responded that other measures can be taken to increase supply. On Friday, Bush again emphasized that his energy plan would be based on expanding the nation's domestic reserves, including exploring for oil in the Arctic, a step that Gore opposes. "I'm convinced we can explore in an environmentally friendly way in Alaska," Bush said. Bush also blasted Clinton and Gore for changing course. "Ten months ago the president and vice president thought it was a bad idea to release oil from the Strategic Petroleum Reserve," Bush said. "Now that we are 46 days away from the election, they've changed their minds. I agreed with them that it was a bad idea in the past, and I still think that it's a bad idea today. The Strategic Petroleum Reserve needs to be used in case of war and in case of major disruption of supply. This is an administration that has had no energy plan. . . . I believe the vice president has made this decision, with the support of the president, for short-term political gain." - Information from Knight Ridder, the Boston Globe and the Associated Press was included in this report.
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