REUTERS - The U.S. government
is slated to sell $375 million worth of crude oil from the country's emergency
reserve this winter after Congress passed a temporary
spending bill on Friday
that contained a measure authorizing the sale.
President Barack
Obama's administration has pushed Congress to approve an up to $2 billion plan
for a revamp of the Strategic Petroleum Reserve, a string of heavily guarded
underground salt caverns along the Gulf of Mexico filled with crude. The stash
currently holds about 695 million barrels of oil.
A Department of
Energy spokeswoman said authorization in the spending bill "will allow the
Department to take necessary steps to increase the integrity and extend the
life" of the reserve.
Congress passed the
original funding for the reserve after the 1973 to 1974 Arab oil embargo to
protect the country from global supply disruptions that have the potential to
spike domestic fuel prices and damage the U.S. economy.
Many of the
reserve's steel tanks and pumps are now rusting after decades of being whipped
by storms and exposed to salt air. A plan submitted to Congress by the Energy
Department in September said "this equipment today is near, at, or beyond
the end of its design life."
In addition, the
U.S. oil boom of the last decade has reversed the direction of many pipelines
away from the reserve, making it more difficult to get oil to market in a
hurry.
The $375 million
sale, or nearly 7.3 million barrels of oil in today's price, is just the first
planned installment. For each of the next three fiscal years Congress would
have to approve the annual sales to reach the up to $2 billion revamp plan. It
remains to be seen whether President-elect Donald Trump would urge Congress for
the annual authorizations in the coming years.
This sale, which
could take place seven to nine weeks after the temporary spending bill is
enacted, would pay for the design of the revamp of the SPR and other
pre-construction costs. Further sales would pay for construction of new
equipment and new marine terminals to allow the reserve greater capacity to
ship oil by vessels.
REUTERS
0 Comments