U.S. Prepared to Release Emergency Oil

news.moneycentral.msn.com March 17, 2003 1:52:00 PM ET By Tom Doggett

WASHINGTON (Reuters) - As a possible war on Iraq looms, the U.S. Energy Department is ready to release oil from the nation's emergency stockpile if needed to counter any disruption in crude supplies, the Republican head of the House Energy and Commerce Committee said on Monday.

A war with Baghdad would shut down Iraq's 1.7 million barrels a day in oil exports. However, there are market fears that military action could also disrupt oil shipments from neighboring Saudi Arabia and Kuwait.

Rep. Billy Tauzin, the Louisiana Republican who chairs the House energy panel, said the Strategic Petroleum Reserve (SPR) was ready to be used if needed.

``Our review with the Department of Energy has convinced me that the SPR is fully operational and capable of releasing crude oil within the parameters required to prevent interruptions in crude oil deliveries to the market,'' Tauzin said in a letter to fellow lawmakers.

``The SPR has, for some time now, transitioned from the 'fill' mode to the 'flow' mode and is prepared to flow upon orders from the president,'' Tauzin said.

Oil markets have been skittish in recent weeks due to the possible war, supply disruptions in Venezuela and skyrocketing prices. Tauzin made his comments in a letter to U.S. lawmakers urging their support to expand the reserve to 1 billion barrels from its current capacity of 700 million barrels.

Congress created the stockpile in 1975 after the Arab oil embargo. It now holds 599 million barrels of crude in underground salt caverns at four sites in Texas and Louisiana.

An Energy Department spokeswoman said she had not seen the Tauzin letter and could not comment on it directly.

'NOTHING NEW'

However, she said there was ``nothing new'' with the administration's position on when and if it will use the emergency reserve.

She repeated comments by U.S. Energy Secretary Spencer Abraham that the administration ``was prepared'' to tap the reserve if there was a severe oil supply disruption.

But at this point we have not made a decision to move on the Strategic Petroleum Reserve,'' the spokeswoman said. We are monitoring the situation very carefully.''

The price of U.S. oil traded at the New York Mercantile Exchange fell on Monday on talk that the United States was ready to release oil from its emergency reserves if war broke out with Iraq.

At 12:40 EST, crude oil for delivery in April was down 83 cents at $34.55 a barrel.

If the administration decided to release oil from the SPR, the reserve's crude could be moved into the market between 10 and 15 days after a drawdown order from President Bush.

A White House spokesman would not say if Bush would include an announcement regarding the oil reserve in his televised address to the American people Monday at 8 p.m. EST.