CQ TODAY
May 1, 2008 – 8:51 p.m.
Parties Warm to Oil Reserve Freeze

With record prices at the gasoline pump creating a new sense of urgency, a proposal to freeze deliveries of oil to the nation’s Strategic Petroleum Reserve is gaining support from members of both parties.

Senate Republicans, who have long backed the White House in opposing the idea, included a moratorium on deliveries to the reserve in a package of proposed energy legislation released Thursday.

“I was against it and now I’m for it,” said Pete V. Domenici of New Mexico, ranking Republican on the Energy and Natural Resources Committee and his party’s point man on energy policy. “There’s a shift in the party, and it’s because of gas prices.”

Democrats have long opposed pumping more oil into the reserve when prices are high, arguing that it takes supplies off the market and pushes prices even higher. Until now Republicans have generally followed the lead of President Bush, who contends that a moratorium on deliveries to the reserve would have almost no effect on prices.

The changing political dynamics underscore the pressure on lawmakers to do something about rising gasoline prices. Democrats and Republicans in Congress have been trading blame in recent weeks as they jockey for an election year advantage.

Both parties have competing legislative packages designed to rein in prices, but they always run up against their fundamental difference in energy policy — Democrats emphasize cutting demand while Republicans stress increasing supplies.

In the Senate, particularly, the movement to halt deliveries to the reserve is picking up bipartisan momentum. The strategic reserve has the capacity to store 727 million barrels of crude oil underground, as a hedge against a sudden cutoff of imports. Currently, it holds about 701 million barrels, roughly equal to 58 days of imports.

Democratic senators have proposed halting deliveries to the reserve whenever crude oil prices exceed a price threshold. An amendment that North Dakota Democrat Byron L. Dorgan hopes to offer on a Federal Aviation Administration authorization bill (HR 2881) would halt deliveries as long as the price of crude oil remains above $75 a barrel. Crude oil futures hit a record $119.93 a barrel earlier this week.

The Republican plan would not be pegged to a price trigger. Instead, Republicans are proposing a six-month moratorium on deliveries to the reserve. It is unclear whether the two parties could reconcile the differences in their approaches.

“I have resisted efforts in the past to put a freeze on shipments,” said Sen. Kay Bailey Hutchison of Texas, who chairs the Republican Policy Committee and was among 16 senators who sent Bush a letter urging him to suspend deliveries to the reserve through the summer driving season. “But I think today, with oil at $120 a barrel, it’s time for a moratorium.”

She said stopping deliveries to the reserve would slow rising prices.

“We’re trying to raise the subject with the president,” said Ted Stevens, R-Alaska, who has also changed his views on filling the reserve. “We ought to purchase for the [reserve] when the prices are low and slow down those purchases when prices are high.”

While Energy Department officials have long rejected arguments that filling the reserve increases consumer prices, the agency’s independent research arm concluded earlier this year that the addition of 100,000 barrels each day would increase the price of oil by $2 per barrel and raise the cost of a gallon of gasoline at the pump between 4 and 5 cents. Other analysts have a projected even larger impacts.

Senate Democrats are scheduled to unveil their own energy package soon, and it is likely to include some halt on deliveries to the reserve; House Speaker Nancy Pelosi, D-Calif., has also urged a halt to adding oil to the reserve.

Senate Democrats are also considering moves to tighten federal regulation of oil futures markets and to temporarily suspend the federal 18.4-cents-a-gallon gas tax.

The Republican package includes a menu of proposals that have been rejected in the past, such as allowing energy exploration in the Arctic National Wildlife Refuge and in coastal waters off the Atlantic and Pacific seaboards. The Republican plan also recommends measures to promote development of coal-to-liquids technology, which environmentalists oppose.

Domenici said he hopes the same pressures that led him to reverse his stance on the strategic reserve may encourage Democrats to re-evaluate their own views on some of the Republican ideas.

“You voted against it before,” Domenici challenged Democrats. “But now you have to take another look.”

Source: CQ Today
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