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US DOE To Start Purchasing SPR Oil In Spring 07 January 23, 2007

Posted by notapundit in Economic News.
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WASHINGTON (Dow Jones)–To boost the size of the nation’s emergency oil stockpile, the U.S. Energy Department is planning to begin purchasing crude oil this Spring at a rate of about 100,000 barrels per day, U.S. Energy Secretary Samuel Bodman told reporters Tuesday.

The acquisition is part of a new plan to double the capacity of the Strategic Petroleum Reserve to 1.5 billion barrels by 2027.

President George W. Bush will outline the proposal later Tuesday in his annual State of the Union address before Congress.

“In the Spring, about two months from now” DOE will begin by purchasing oil with funds generated “from the sale of stocks from the SPR after Hurricane Katrina,” Bodman said. “We believe we can purchase 11 million barrels of oil over a few months.”

In the wake of Hurricane Katrina in September 2005, the U.S. government sold 11 million barrels of crude oil from the SPR as part of an international effort to mitigate supply disruptions brought on by the severe storms.

Bodman said he expects DOE to begin purchasing crude oil in the spring at a rate of about 100,000 barrels per day.

“After a few months, we will reassess the market before continuing the fill using royalty in kind payments through the end of the year,” he said. “In 2008 and beyond, as we work our way to 1.5 billion barrels, the Department will determine future fill rates based on information and market conditions available at that time.”

Bodman also said crude oil will be acquired in a manner that doesn’t raise gasoline prices or adversely affect the market.

“We will fill the reserve in a deliberate, predictable, and transparent manner,” he said.

The secretary noted that DOE has already made plans for the expansion of two SPR sites and said “we have selected a new site in Mississippi that we are in the process of finalizing.”

Expanding the SPR is “a wise and prudent policy decision” that would give the country an extra layer of protection for energy security, the secretary added.

Last year, Congress gave the Bush administration the authority to boost capacity to 1 billion barrels.

Bush will ask lawmakers for the authority to add another 500 million gallons of capacity.

Currently, 691 million barrels are in the SPR, an amount that represents 55 days of net oil imports, according to the White House. By contrast, the reserve held around 118 days of net oil imports in 1985.

The SPR initiative is one part of a Bush’s strategy to reduce U.S. dependence on foreign oil.

The president also will detail a proposal to cut gasoline use by 20% over 10 years, a proposal that relies on sharply increasing the availability of alternative fuels and reforming fuel efficiency standards for cars.

By Maya Jackson Randall, Dow Jones Newswires

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