Pelosi calls on Bush to release reserve oil
House leader says releasing of a 'small portion' of the 700 million barrels of oil in the nation's Strategic Petroleum Reserve won't risk national security.
WASHINGTON (CNN) -- U.S. House Speaker Nancy Pelosi on Tuesday urged President Bush to release crude oil from the nation's Strategic Petroleum Reserve to combat high prices, a call Republicans used to bolster their push to increase domestic production with more drilling in environmentally sensitive areas.
The Department of Energy plans to suspend this delivery of the 70,000 barrels of oil per day currently going into the SPR - per a law Congress passed in May that required the suspension until the end of 2008. But many Democrats want Bush to go further.
Pelosi sent a letter asking the president "to draw down a small portion" of the SPR's more than 700 million barrels of oil "to help reduce record prices that are helping push the economy toward recession."
"Releasing oil from the Reserve is a tool to manage our national and economic security, and when judiciously used will in no way jeopardize national security," the California Democrat wrote.
The SPR was established in the aftermath of the oil embargo in the early 1970s and is intended for use in case of a disruption in oil supplies. Suspending or drawing down supplies from the reserve is not typically done to regulate prices, but Pelosi noted that crude prices have dropped when the United States has opened the spigot on the SPR in the past.
Still, the White House rejected the speaker's call, saying that using the reserve to manipulate prices was "ineffective."
"It's unfortunate that the only place Democrats in Congress can find to explore for more resources is the Strategic Petroleum Reserve," said White House spokesman Scott Stanzel. "It is time to put aside these politically-motivated band-aids offered by the Democrats and do something that will improve our energy security in the future like expanding access to American energy in" the Arctic National Wildlife Refuge (ANWR) and Outer Continental Shelf (OCS).
Without directly opposing her proposal, House GOP leader John Boehner of Ohio said that Pelosi's call to release supplies from the SPR meant that she "is admitting yet again that increasing the supply of oil will help reduce the price of gasoline."
"I agree, and so do my House Republican colleagues who have been arguing for decades in favor of more American energy production," he said.
House Republican Conference Chairman Adam Putnam, R-Florida, and House Republican Whip Roy Blunt, R-Missouri, have pledged to force a vote on bills to allow offshore drilling and exploration in ANWR before Congress leaves for its month long August break.
Democrats have repeatedly driven back attempts to open ANWR and the OCS for oil drilling, arguing that any help for skyrocketing prices would be years away and miniscule. Republicans argue that increased exploration for domestic oil sources would signal that the United States is intended to take care of its own energy needs and would drive down costs.
New drilling in the OCS - shallow ocean areas just off the coast that slope for miles into deep sea - was banned in 1991 after the disastrous Exxon Valdez oil spill in Prince William Sound, Alaska. The Energy Department has estimated that 86 billion barrels of oil may be present in areas currently off limits to drilling.
The Energy Department has estimated that ANWR could produce as much as 1.45 million barrels of oil per day within 20 years after it is opened for exploration. The United States currently consumes about 21 million barrels of oil per day.
Pelosi spokesman Nadeam Elshami noted that Democrats support a bill that would require oil companies that hold existing federal leases for oil drilling to begin exploration or lose the rights to those leases.
"(Republicans) are ignoring the fact that 68 million acres on shore and offshore could be drilled at this moment," he said. "Providing oil companies with additional public lands would not lower the price of gas and would not provide relief to American families."
Nearly 10,000 such leases are open. Republicans say it takes time to develop such leases and that if older leases are not currently in production, it's because it's not financially viable to do so.
Putnam and Blount admitted their options for forcing the ANWR/OCS issue in the House of Representatives are limited, but Putnam predicted the issue could be "potentially a game changer" for Republican prospects in the November election.
Regardless of the back-and-forth on oil supplies, experts are divided on whether increasing supplies would mean lower gasoline prices. Noting that the SPR holds crude oil and not refined gasoline, Mark Cooper, research director for the Consumer Federation of America, told a Congressional hearing in April that the oil industry has failed to add refinery capacity to keep up with demand.
"By failing to expand production capacity to meet demand and provide a reasonable reserve in an industry with very low supply and demand elasticities that is prone to accidents and disruptions, the markets became tight and volatile," he told members of the House Select Subcommittee on Energy Independence and Global Warming, adding "Crude oil will not do much good without the ability to refine it."
Cooper testified that putting SPR's 70,000 barrels per day back into an 85 million barrels per day market would have "little if any impact on prices." But he told the representatives that the current SPR policy should be overhauled, noting that the Bush administration had failed to fill the reserve when prices were low and now objects to stopping the fill with prices at record highs.
Melanie Kenderdine, associate director of the Massachusetts Institute of Technology Energy Initiative and former oil policy analyst for the Department of Energy, testified at the same hearing that the SPR has been "inconsistently" used.
Kenderdine noted that drawdowns from the reserve were not triggered with the loss of more than 2 million barrels per day at the start of the Iraq war but were used with the loss of less than a million barrels per day after Hurricane Katrina disrupted refineries in the Gulf Coast. In that instance, crude oil from the reserve was traded for refined product from Europe.
She also said that the sale of crude oil from the reserve, currently at an average cost of less than $30 per barrel, could dramatically reduce gasoline prices and also could provide needed funding for research and development into alternative energy sources - ultimately the only way to eliminate the country's dependence on fossil fuels.
"An outright sale of 40 million barrels of oil from the SPR would generate almost $4.5 billion in new revenues," she testified. "This would have the added benefit of lowering prices to consumers.
"For those who say we would diminish our energy security by so doing, I would point out that this would reduce the amount of oil in the SPR to around 660 million barrels, roughly 60 million barrels more than was in the reserve when we invaded Iraq when, presumably, this level of oil insurance was deemed sufficient to protect our energy security interests during a war in the Middle East."