President agrees to release oil

Action comes day after Gore proposal to ease heating costs

`This is a rainy day'

Republicans attack move as political, misuse of reserves

September 23, 2000|By Jonathan Weisman | Jonathan Weisman,SUN NATIONAL STAFF

WASHINGTON - Barely 24 hours after Vice President Al Gore called on the White House to tap the nation's strategic oil reserves, President Clinton agreed yesterday to release 30 million barrels of oil over 30 days, the largest such action in the history of the nation's emergency supply.

The move was immediately denounced by Texas Gov. George W. Bush, Gore's Republican rival for president, as a bald political ploy on the part of Clinton.

Clinton ordered the move to bring down the cost of home heating oil, used primarily in the Northeast, said Energy Secretary Bill Richardson, who announced the action.

"The president will do everything within the power of the federal government to ensure that Americans have the fuel they need to heat their homes," Richardson said. "It's the right time to do this."

But Gore and the White House hope the move could also lower surging gasoline prices that have become an issue on the campaign trail from coast to coast.

Richardson strenuously denied any political motives to the move, but Bush pounced quickly, saying the 571-million-barrel reserve should be tapped only "in case of war or a major disruption."

"I believe that the vice president has made this decision with the president's support to achieve short-term political gain," he added.

The release is even greater than that of 1996, when Congress ordered the sale of 28 million barrels of oil to lower gas prices and to raise revenue for federal education spending.

Technically, the move is an exchange, not a sale. The government will take bids from oil companies beginning Monday. The first contracts are to be signed Oct. 2, with delivery beginning in November.

The high bidders would have to replace the reserve oil at a later date, when oil prices fall and oil supplies begin to loosen.

A similar exchange occurred in July, when the oil companies Citgo and Conoco "borrowed" 1 million barrels to keep two refineries open when shipping lanes to the facilities were blocked by a sunken ship.

In 1996, ARCO took 900,000 barrels from the reserve to remedy a pipeline glitch, then returned the oil, plus $2 million in cash.

Still, this sale is remarkable because of its size, and because no single emergency has precipitated it. Even during the Persian Gulf war, sales from the reserve totaled just 21 million barrels, and that was over seven months, not 30 days, said retired Adm. James Watkins, President George Bush's energy secretary.

Watkins, who was made available to reporters by the Republican National Committee, charged that Clinton's order constituted "a very serious violation" and "misuse" of the law that created the reserve during the energy crisis of the early 1970s.

"We don't have a national emergency," Watkins said.

Richardson disagreed. The oil reserve was set aside for a rainy day, he said, and "we think this is a rainy day."

The American Petroleum Institute, which represents the oil industry, was quick to decry government interference in the free market. Independent analysts say 1 million new barrels a day over 30 days will lower prices, at least in the short run. Americans consume 15.3 million barrels a day, according to Mark Wilson, an energy research fellow at the Heritage Foundation.

Wilson, who opposes the sale, predicted that it would likely drop prices at the pump by a nickel. In April 1996, when Clinton ordered the release of 12 million barrels, gas prices dropped 4.62 cents almost at once.

Oil prices have been falling, from a high of nearly $38 a barrel on Wednesday to $32 yesterday. The administration's announcement will push them down further, Wilson said.

The only risk, Wilson said, would be an unexpected early cold snap, a natural disaster or political unrest in the Middle East that might swamp any benefit that a reserve sale could reap.

"But that's a gamble that President Clinton and Al Gore are willing to take," Wilson said.

Richardson insisted the release is not designed so much to lower prices as to increase the supply of home heating oil this winter. He estimated that the 30 million barrels now will encourage refiners to divert some crude oil away from gasoline production to home heating oil.

It should also lower the price of diesel fuel to ease the truck transport of heating oil to the northern states, Richardson said.

"The president's reasons for taking this action are very clear," Richardson said. "Portland, Maine, will be in the 50s next week. So will Minneapolis. And it snowed in the Rockies yesterday. We need to make sure that American families keep warm."

Despite Richardson's claim that politics was not involved, the release appeared carefully choreographed. The move had been strenuously debated within the administration, with Treasury Secretary Lawrence Summers strongly opposed and Richardson strongly in favor.

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