Amid a world oil glut and declining prices, the United States is moving for the first time to fill its emergency petroleum reserve to its full 700-million-barrel capacity over the next few years.
President Bush on Tuesday directed that the reserve be filled "in a deliberate and cost-effective manner," beginning as soon as possible, to protect against oil supply disruptions.
The shipments to the Strategic Petroleum Reserve, a series of Gulf Coast salt domes in Louisiana and Texas, are expected to begin next April and continue into 2003 at up to 130,000 barrels a day, according to the Interior Department.
Administration officials stressed there was no imminent threat of an oil supply interruption and denied the announcement was related to the war on terrorism or growing Middle East tensions.
"There's not any linkage to any kind of specific disruption threat, but we think it's a wise policy," Energy Secretary Spencer Abraham told reporters.
"Our current oil inventories, and those of our allies who hold strategic stocks, are sufficient to meet any potential near-term disruption in supplies," Bush said. He said the additional reserves "will strengthen (our) long-term energy security."
While the amount of diverted oil will be small compared to the total oil market, it sends a signal that the United States wants to stabilize prices by taking some crude out of the market.
Oil prices for future delivery jumped, with December crude rising 44 cents to $21.67 in trading on the New York Mercantile Exchange. Light crude was $21.82 on the New York spot market Tuesday.
The announcement came a day before oil ministers of the Organization of Petroleum Exporting Countries were to meet in Vienna, Austria, to decide on production cuts to stem the recent slide of world crude prices. The worldwide economic slowdown, exacerbated by the Sept. 11 terrorist attacks, has resulted in an oil glut, forcing down prices.
The reserve has 544-million barrels of oil, enough to replace 54 days of oil imports. Created in 1975 after the 1973 Arab oil embargo, the reserve is to be used to counter supply disruptions.
The United States uses about 19-million barrels of oil a day, with a little over half of that coming from imports.
The government has suspended oil purchases and tapped the reserve more than a half-dozen times, including 1990-91 _ during the Gulf War _ and last fall, when 30-million barrels were removed to stem soaring prices.
Under existing agreements, about 48-million barrels are scheduled to be returned to the reserve by the end of next year, including the 30-million barrels taken last October. The president's directive Tuesday calls for another 108-million barrels to go into the reserve.
Little if any of the oil is expected to be purchased outright. Instead it is to be provided by producers holding federal oil leases in the Gulf of Mexico, in lieu of cash royalty payments to the Treasury.