White House: Energy policy could help mitigate oil shocks

ogj.pennnet.com   By OGJ editors WASHINGTON, DC, Jan. 24 -- The US remains vulnerable to oil supply shocks from Venezuela and other foreign suppliers because the nation still lacks a comprehensive energy policy, White House officials said.

US State Department officials said Thursday the political crisis in Venezuela was still "very tense" and that the "urgency of reaching a peaceful resolution remains."

"This is a long-term issue, but if 10 years ago, Congress and the administration had been able to work in a long-term way on energy, we wouldn't be in the spot we could be in today, with action on Venezuela, for example, driving up the price," White House spokesman Ari Fleischer said Wednesday.

Earlier this week oil prices temporarily moved above $35/bbl for the first time in 2 years before retreating to lower levels above $30/bbl. But more oil from key US allies, including Saudi Arabia, may keep market conditions in balance to avoid a Strategic Petroleum Reserve release, officials suggested.

"The President expressed his gratitude to OPEC (Organization of Petroleum Exporting Countries) and to Saudi Arabia for their increase in production," said Fleischer.

Longer-term, the US needs to have a blueprint so the country is better insulated against sudden supply shortages, he added.

"There are a variety of ways to approach this issue, including increased conservation, increased production, and increased diversification of supply. But it still remains an issue that the American people want people in Washington to deal with long-term," Fleischer said.

Congress debated but failed to pass a sweeping energy bill last year. This year key lawmakers, including Billy Tauzin (R-La.), chairman of the House Energy and Commerce Committee, say they want to pass a comprehensive bill. But it is unclear whether there is enough interest by members to achieve that goal.

Venezuela update Members of the Organization of American States met Friday with US Sec. of State Colin Powell, hoping to move forward with a plan to end the impasse. Oil exports over the past 2 months have fallen by more than 50% because of striking oil workers seeking to oust populist President Hugo Chávez from power.

Earlier in the week, former President Jimmy Carter sought to broker a compromise by offering two options both generally supported by the Bush administration. One was for a constitutional amendment that would shorten terms of Venezuela's president and National Assembly, to be followed by elections. A second option called for a Venezuelan referendum in August, which could trigger presidential elections in September.

"We think these options offer both sides in Venezuela an excellent basis to craft a solution to the immediate impasse with international support for implementation of the agreement. So we'll see if they will pick those up," said Boucher. "We do think the government and the opposition should consider these options very carefully."

Similar options previously have been suggested by Chávez's opponents but not accepted by government officials.

EIA analysis An Energy Information Administration analysis said Thursday that even if additional oil imports from other countries begin to arrive, it is doubtful that, without near-normal levels of Venezuelan imports, US crude inventories can be maintained significantly above 270 million bbl with US refinery inputs remaining near 15 million b/d.

"One or the other clearly has to fall," EIA said. In a separate EIA report, it appeared that refinery inputs were declining while imports, largely from Saudi Arabia, were increasing.

Despite predictions from some analysts that inventories may slip by 3 million bbl, the US Department of Energy reported Thursday that US oil stocks grew by 1.5 million bbl last week, reaching 273.8 million bbl. The American Petroleum Institute later reported a smaller increase of 181,000 bbl to 272.4 million bbl for the same period.

Based on DOE figures, total US commercial petroleum inventories last week were 44.1 million bbl below the 5-year average. "In other words, relative to a normal pattern, the US market tightened at a rate of 1 million b/d," said Paul Horsnell, head of energy research for JP Morgan Chase & Co., London (OGJ Online, Jan. 23, 2003).