Strategic Petroleum Reserve Oil Sale Cancelled, Taxpayers are Winners Due to Bipartisan Effort

Secretary Federico Peña today announced that the sale of Strategic Petroleum Reserve crude oil has been officially cancelled following President Clinton's determination that a provision halting the sale should be included in the Federal Government's emergency supplemental appropriations for fiscal year 1998.

"We have stopped the sale and scored a victory for American taxpayers who stood to lose $175 million or more by selling oil at less than half the price we paid for it," said Secretary Peña. "This show that Congress and the Administration can work together in a bipartisan way on behalf of the American taxpayer and to benefit the energy security of this country."

Peña praised the Congressional members who worked to reverse the previous legislative directive to the Department to sell $207.5 million of oil from the nation's emergency oil inventory to offset a portion of this year's appropriations.

"I commend those in Congress who followed through on their commitment to find a legislative solution that would negate the sales requirement," Peña said. "In particular Representatives Regula, Livingston, Obey, Schaefer, and Ralph Hall, and Senators Bingaman, Byrd, Murkowski, Stevens and Gorton deserve special credit for stepping forward to do what makes the most sense in terms of both financial and energy policy. They recognize, as does the Administration, that the Strategic Petroleum Reserve is vitally important to discouraging politically motivated international oil disruptions and ensuring our nation's continued economic security in the event disruptions do occur."

Under the Emergency Supplemental Appropriations bill signed into law by the President on May 1, 1998, the White House had to include the provision halting the sale in a formal budget determination which was sent to Congress today. Also, in accordance with the appropriations language, the President included a finding that the sale "would be imprudent in light of current market conditions."

Peña said that if the sale had not been stopped, the sharp dip in oil prices could have forced the Department to sell perhaps twice the amount of oil originally anticipated. The type of oil likely to have been offered would probably have been priced by the market at from $10 to $15 per barrel, requiring a sale of up to 21 million barrels to meet the revenue target. The sale could have dropped the Reserve's current 563 million barrel inventory to perhaps 542 million barrels, the lowest level since 1987.

Peña noted that avoiding the sale was also important to the Nation's smaller oil producers because releasing this quantity of oil into a weak oil market would have further depressed oil prices, making many marginal wells uneconomic and possibly causing some smaller producers to go out of business.

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For additional information, contact:
Robert C. Porter, (202) 586-6503 e-mail: robert.porter@hq.doe.gov