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Does U.S. need oil reserve?
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September 18, 1996: 8:01 p.m. ET
Some question continued need for U.S. Strategic Petroleum Reserve
From Correspondent Sean Callebs
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NEW YORK (CNNfn) - Renewed Middle East tensions have again focused attention on U.S. reliance on overseas oil.
Washington this month dispatched U.S. troops to Kuwait, while terrorists recently attacking U.S. military housing in Saudi Arabia.
At the same time, Islamic fundamentalists have allegedly caused unrest in Egypt and Algeria, while there is civil unrest in Nigeria. (2.14MB QuickTime Movie)
All of these areas are global "hot spots" -- and all are oil-rich regions.
"The American public should very much be concerned about what's going on around the world," said analyst Sal Ilaqua. "Because it is going to have an impact sooner or later on the price and the quantity of oil. (111K WAV) (111K AIF)
After all, the United States is the world's largest oil consumer -- and importer. Currently, the nation depends on overseas supplies for roughly half of the 16 million barrels it uses daily.
After the Arab oil embargo of the mid-1970s, the United States decided to protect itself from short supplies by developing the Strategic Petroleum Reserve, a 700-million-barrel, government-owned oil.
The reserve, stored in Louisiana and Texas, is designed to supply the U.S. market for nearly 60 days should global oil shipments become threatened.
However, some industry analysts are questioning the SPR's continued existence.
They say that while oil costs might rise dramatically in a crisis, it's unlikely the United States would ever find itself completely cut off from world supplies.
At the same time, many industry observers criticized President Clinton's decision to sell approximately $100 million worth of SPR oil in an effort to chip away at the federal deficit.
"Once you start selling oil from the SPR as a budgetary measure, then when do you stop it?" queried John Lichtblau, chairman of the Petroleum Industry Research Fund. "What happens the next year, and the next year?" (107K WAV) (107K AIF)
Still, not all analysts oppose maintaining the SPR.
Some note that the one time the nation actually tested the reserve under fire -- during the Gulf War -- the SPR served its purpose.
At the start of the Gulf War, then-President George Bush sold more than 10 million barrels from the reserve in a bid to stabilize oil markets.
The move had an immediate impact, reducing oil prices from $30 a barrel to the low $20 range.
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