Sales from U.S. oil reserve risk a price spike, IEA official says
WASHINGTON — Plans to sell off 40 percent of the U.S. Strategic Petroleum Reserve over the next eight years risks a spike in global energy prices, a top official at the International Energy Agency warned the Senate on Thursday.
Congress has authorized the sale of almost 260 million barrels of crude to help fund the federal budget, in part on the argument a boom in U.S. oil production has reduced the need for a national oil reserve, which currently holds 645 million barrels.
But Keisuke Sadamori, director of energy markets and securi
ty at the Paris-based International Energy Agency, cautioned that the IEA depends on the United States for 40 percent of its global reserve program, which is used to cushion oil supply shocks — such as a war in the Middle East — and stabilize markets.
“I would like to stress that oil security is not only an issue for net-importers, and security concerns such as regional extreme weather events and terrorist attacks can affect all countries,” he said. “Should the U.S. further draw down its SPR levels, there could be a challenge to the future effectiveness of the IEA stock system.”
Congress has long
looked to the oil reserve as a means to patch the federal budget; the most recent authorized sale would draw $13 billion in revenue at current oil prices.
But some senators at Thursday’s hearing before the Senate Energy and Natural Resources Committee cautioned the risks of that approach.
They cited last month’s attack on Saudi Arabia’s Abqaiq plant, which processes 5 percent of the world’s oil supply, as a sign of the risks posed to oil facilities worldwide.
“People who do not sit on this committee don’t really think about the SPR,” said Sen. Lisa Murkowski, R-Alaska, chair of the committee. “They look at it as liquid money in the bank.”
Right now, the U.S. petroleum reserve, located
across four sites along the Texas and Louisiana Gulf Coast, has enough to cover oil imports for 440 days — far beyond the 90 days mandated by the IEA.
But getting down to that minimum level risks a shock to oil markets that would wreak havoc on the U.S. economy in the event of a major supply disruption, said Jason Bordoff, director of Columbia University’s Center on Global Energy Policy.
“What we are concerned about is an impact on oil prices around the world,” he testified. “The fact (that) we are about to be an oil exporter but the IEA is here today saying we shouldn’t sell our stocks suggests 90 days isn’t adequate cover.”