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September 22, 2000
Clinton Orders Release of Oil
From U.S. Emergency Reserve
A WSJ.COM News Roundup
WASHINGTON -- President Clinton directed the release of 30 million
barrels of oil from the government's emergency reserve in an attempt to
drive down oil prices.
The Energy Department announced the release after the president held a
meeting with key advisers at the White House and a day after Vice
President Al Gore urged the president to use the reserve as leverage to try
to head off soaring heating oil costs this winter.
Lawmakers in the U.S. Northeast have
clamored for use of the government oil to
rein in oil prices, which in recent days
peaked at nearly $38 a barrel.
Energy Secretary Bill Richardson said the
Clinton administration was prepared to
take further action, if necessary. He also
said it will continue discussions with
producing nations.
Campaigning in Pennsylvania, Mr. Gore, the Democratic presidential
candidate, reiterated his call Friday for use of the oil reserve -- a
government stockpile of 570 million barrels of crude -- to ease tight oil
supplies and reduce prices.
Under the Gore plan, the U.S. would execute a number of five-million
barrel "swaps" of oil to signal markets that the U.S. will use the Strategic
Petroleum Reserve of oil to jawbone prices downward.
Under such swaps, oil companies would borrow oil from the reserve and
pledge to repay it later, also in oil, presumably after prices have declined.
That way, the reserve also would build up oil stocks.
"America's energy resources should not be
reliant on others [and] so subject to shortages
and so vulnerable to big oil interests," Mr.
Gore said at a campaign stop Thursday at an
oil distributorship in St. Mary's County, Md.
News of Mr. Gore's proposal sent oil prices
down sharply on Thursday. The downturn
continued on Friday, with benchmark West
Texas intermediate crude falling $1.32 to close
at $32.65 a barrel.
But his push to cap fuel prices opened the vice
president to charges of political grandstanding,
and Mr. Clinton's decision brought sharp
criticism from Republicans.
George W. Bush, a former Texas oilman and Mr. Gore's rival for
president, said the reserve was designed to address critical supply
interruptions and not to manipulate the market.
"The strategic reserve is an insurance policy meant for sudden disruption of
oil supplies or for war," Mr. Bush said Thursday during a campaign stop in
Cleveland. "The strategic reserve should not be used as an attempt to drive
down oil prices right before an election."
Mr. Clinton's decision may serve as a clear signal to members of the
Organization of Petroleum Exporting Countries of the administration's
willingness to use the reserve to move markets.
Mr. Bush has been slow to seize on the gasoline-price issue, leaving
Democrats to allege that he and his running mate Dick Cheney, head of
oil-services company Halliburton Corp. until his selection, are in cahoots
with "Big Oil."
Thursday, even Treasury Secretary Lawrence Summers, the harshest
administration critic of oil sales, endorsed the Gore plan as a "prudent use"
of the reserve, which "could be appropriate in current circumstances."
Last week, Mr. Summers, who is expected to remain Treasury secretary
should Mr. Gore win the presidency, sent a scathing confidential memo to
Mr. Clinton opposing sales as "a major and substantial policy mistake." In
the memo, though, he did allow that there were limited "alternatives" that
wouldn't be objectionable.
The government reserve, created in 1973, has been used only once in
response to an oil emergency -- when former President Bush ordered a
partial drawdown because of supply disruptions from the Middle East
caused by the Gulf War. The move, and production increases
internationally, maintained market stability and kept oil prices down during
the six-week conflict between U.S.-led forces and Iraq.
U.S. refineries use about 14 million barrels of oil a day and the country
consumes 18.6 million barrels of oil products daily.
The president of OPEC said Friday that any drawdown of U.S. reserve
would cause only a temporary dip in world oil prices.
"Prices will fall, but the effect will be temporary," Ali Rodriguez, who is
Venezuela's oil minister as well as OPEC's president, said in a televised
interview.
He said the world market needs so-called sweet crude to ease shortages
of products such as gasoline, while the U.S. strategic reserve mainly
consists of solid crude.
Use of the reserve to try to impact prices has been the subject of intense
debate within the White House for months. Last spring, when oil prices
soared and gasoline costs skyrocketed, the president's advisers were
largely opposed to intervention.
But in recent weeks, views began to change, according to a senior White
House official.
"What is different is that you've got more people feeling this ... might be
justified," said the official, who spoke on condition of anonymity. He said a
key factor was a realization that a series of decisions by OPEC oil
producers to increase production was not having the expected effect of
reducing oil prices.
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