commodities
sexta-feira, março 14, 2003
wsj 14mar03
to release or not to release. for now....not
March 14, 2003 12:13 a.m. EST
POLITICS AND POLICY
GIRDING FOR WAR
U.S. Waits to Draw On Own Oil Reserve
Saudi Arabia Cheers Decision Not to Tap
Backup Supply; Policy Halts Oil-Price Fall
By JOHN J. FIALKA
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- The U.S. has deployed hundreds of thousands of troops and billions of dollars in equipment for a possible war against Iraq, but it may refrain from using one of its most effective tools in defense of the economy -- the Strategic Petroleum Reserve.
The U.S. has worked out an agreement with other industrial nations that hold emergency reserves of crude oil to rely on expanded production from the Organization of Petroleum Exporting Countries as the first line of defense against oil-market disruptions, an administration official said. "We expect [OPEC] to step up to the plate. It's in their interest as well as ours."
That marks a big change in approach from the U.S. decision in the Gulf War of 1991, when U.S. officials immediately announced plans to release oil from the reserve, a 599-million-barrel complex of hollowed-out salt domes along the U.S. Gulf Coast. The effect of that announcement was to drive oil prices down sharply, from $32 to $21.44 a barrel in one day. (The oil is released by selling it through auction to private companies.)
Today, market conditions are different and a release of reserves might only bring short-term relief from high prices, Bush administration officials say. Moreover, as part of its energy policy, the administration has tried to save the reserves for real oil shortages, not just to control prices.
That policy is favored by Saudi Arabia, OPEC's biggest producer and a longtime critic of the reserves, which the Saudis argue could be used to drive the price of oil sharply lower. OPEC also fears that a release of emergency reserves -- combined with OPEC oil that is en route -- could flood the market, potentially creating a price crash. The emergency reserves in effect give oil-consuming countries a possible club to move prices and take away some of OPEC's market control.
Ali Naimi, the Saudi oil minister, said this week that OPEC will ensure the world will have enough oil in the event of a war with Iraq. "There will be no shortage of oil," he said.
The Bush administration is taking a wait-and-see position on the use of the nation's 599 million-barrel Strategic Petroleum Reserve, the storage sites for which are located on the map.
White House spokeswoman Claire Buchan noted that the Bush administration appreciates the promise by the Saudis and other producers to raise production if there is a shortage. "We are constantly monitoring the situation," she added.
Some U.S. oil-industry officials also are opposed to an immediate drawdown of reserves. "A release for anything but a shortage could limit the remaining supply should a true shortage develop in the future," said ChevronTexaco Corp. spokesman Fred Gorell. That there has been no release, even as prices have soared, indicates the White House doesn't see an imminent shortage, he said.
William Greehey, chairman and chief executive of refining company Valero Energy Corp., San Antonio, said emergency reserves aren't currently needed, because there is plenty of crude coming on market, including from the Middle East. Mr. Greehey said the industry could have used additional reserves when Venezuelan oil workers went on strike in early December. "If the administration had released oil from the SPR when the Venezuelan strike first began, we would be looking at $27 oil -- rather than $37 oil," he said.
According to U.S. officials, the strategy and the setting for this war are different. Referring to the possible release of the reserve, an administration official put it this way: "There is no automatic trigger for that in terms of an event or a price level."
The Bush administration's wait-and-see position is making some oil-industry analysts nervous. After all, crude prices are running at more than $36 a barrel, $4 above the price on the eve of the Gulf War. Meanwhile, commercial oil stocks in the U.S. and other industrial nations are much lower than they were in 1991. Even the International Energy Agency, the oil-supply watchdog for the industrialized world, has voiced doubts that OPEC has enough surplus capacity left to fill the gap if Iraqi production ceases.
Larry Goldstein, president of Petroleum Industry Research Foundation, a New York firm that analyzes the industry, has discussed the matter with White House aides. "What I've been trying to tell them is that we don't have the luxury of time, given the low level of inventories and the obvious signs that the markets need to be calmed," he said. "The release of the barrels should go with the bombs." Otherwise, he fears, the attack will trigger a severe and perhaps prolonged oil-price surge.
The Strategic Petroleum Reserve was created in 1975 in the wake of oil-supply disruptions during the 1973-74 oil embargo. The law creating it gives the president the option to use the full reserve in cases where there is a "severe energy supply interruption" and the threat of harm to the U.S. economy. The president can also make limited withdrawals from the reserve to curb a domestic supply shortage.
Unlike during the Gulf War, when oil prices rose mainly because of war jitters, crude supplies today are in fact tight. Under these circumstances, a reserve release could knock down prices, but the Bush administration worries that demand would soon drive prices back up again and the reserve will have lost some of the oil it would need if there were a real shortage.
Over the years, the U.S. has invested more than $20 billion to create and build up the reserve, which is located so oil can be quickly fed into the pipeline system that supplies many U.S. oil refineries from ports along the Gulf of Mexico. According to the Department of Energy, which maintains it, the reserve has been tapped nine times and has demonstrated that the mere announcement that the government will accept bids for crude released from the reserve can instantly hammer down market prices.
Within a few days, the reserve is capable of injecting 4.1 million barrels of crude a day into market, more than double the amount Iraq exports to the entire world. However, any use of the U.S. reserves during a possible war would likely be much less than that because about 25 other industrial nations will contribute from their own reserves when IEA members agree to use them.
-- Alexei Barrionuevo in Houston and Susan Warren in Dallas contributed to this article.
Write to John J. Fialka at john.fialka@wsj.com1
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Updated March 14, 2003 12:13 a.m.
