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Energy Secretary Announces Government Plan to Use SPRO

Aired September 22, 2000 - 4:05 p.m. ET


LOU WATERS, CNN ANCHOR: Yes, Terry. And we're going over to the Energy Department, where the official word on a drawdown of the Strategic Oil Reserve is being announced by the energy secretary.

BILL RICHARDSON, U.S. SECRETARY OF ENERGY: ... Minneapolis. And it snowed in the Rockies yesterday.

We need to make sure that American families keep warm this winter and get their heating oil. 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. This is the right time to do this.

Today, distillate inventories across the country, which includes heating oil, are 19 percent lower than they were a year ago. On the East Coast, where 36 percent of families use heating oil to stay warm, distillate inventories are lower still; 40 percent less than last year's levels. In New England, this figure is closer to 65 percent lower than last year.

The underlying causes of these low inventories is an imbalance between supply and demand; increased world demand has sent oil prices skyrocketing. We've worked intensively to get supply up. This administration has encouraged OPEC and non-OPEC producing countries to increase oil production, which they did. We now have 3.5 million more barrels of oil on the market than we did a year ago.

But still, tremendous demand is siphoning off those extra barrels before they can get into inventories, and U.S. crude oil stocks remain very low.

The intended result of this exchange is simple: to increase oil supply.

RICHARDSON: The temporary infusion of 30 million barrels of oil into the market will likely add an additional 3 to 5 million barrels of heating oil this winter if refineries could match higher runs and yields seen in the past.

Increased supplies will also keep our diesel truck drivers who deliver the sole source of supplies for 70 percent of America's communities. If those rigs aren't rolling, many Americans won't get their goods and services, like their food. And the supply boost will likely benefit everyone who drives a car.

Finally, this action enhances our energy and national security. An exchange will ultimately result in more oil in the reserve as our exchange contractors will be returning the Strategic Petroleum Reserve Oil plus a premium. This will further increase the nation's protection against potential or actual energy supply disruptions. That's good, sound energy policy.

The Department of Energy will issue a solicitation on Monday. As has been the case in earlier exchanges, the response to our solicitation will reflect the needs of the market. Awards will be made based on the best deal for consumers, the taxpayer, and the management needs of the Strategic Petroleum Reserve.

We will assess the supply impacts of this exchange on an ongoing basis, along with the market impacts of OPEC's announced increase of 800,000 barrels of oil per day. We are prepared to take further action if necessary.

RICHARDSON: While this action is taken to address a specific concern about U.S. heating oil supply, we recognize that oil is a worldwide commodity. Internationally, we will continue our discussions with producing nations about the situation in the oil market. We also want to work with our allies in Europe and Asia to share information about the establishment and management of reserves and to plan for severe supply disruptions.

Finally, we will continue our efforts with producing and consuming countries and developing nations to improve oil market data for more efficient markets. Again, we are taking this step to reduce the risk of heating oil shortages this winter. The president has already established a Northeast home-heating oil reserve to provide heating oil in the event of an energy emergency.

Through this exchange we can help alleviate tight oil and heating oil supplies, help make certain that Americans can heat their homes this winter and add to the nation's oil insurance policy all at the same time. That's a pretty good rate of exchange for taxpayers, for consumers and the nation.

I'll be prepared to take questions. I might add that following my taking of a few questions, some of our background experts will be available to answer more specific and technical questions about the management of the reserve.

QUESTION: Mr. Secretary, what will you say to the critics who will say that this is really a political manipulation of oil prices to help Vice President Gore win election?

RICHARDSON: This is not political.

RICHARDSON: The president wants to help the American people get home heating oil and have enough heat in their homes. We have extremely low home heating oil stocks, low crude oil stocks for the winter, especially in the Northeast area. And the reason that we are doing this is not for price, but to deal with disruption, to deal with the problems of extreme shortages.

QUESTION: Mr. Secretary, when does the Energy Department begin the bid process for this? And how quickly can you get this oil -- have the bid process complete and get this oil to various firms?

RICHARDSON: Well, the solicitations will start on Monday. They will be sent out on Monday. This involves the Department of Energy, the Department of Defense. We have our experts here who will discuss it further, if you wish.

QUESTION: Mr. Secretary, the vice president suggested you start out with 5 million barrels as, kind of, a test. Are you -- you taking a bigger plunge here, is there a reason for that?

RICHARDSON: The president made some very constructive suggestions that were part of this decision. The view was that what makes the most sense is to do a 30 million barrels for 30 days and reassess after 30 days. Again, this is a swap, not a sale. Again, these stocks will be replenished, the reserve will get these stocks back.

Our view was that it was important to deal with the tightness in the market, but most importantly, as I said, if refineries move to capacity, that this would add the distillate inventories from 3 to 5 million barrels of home heating oil that would get us through the winter.

WATERS: Energy Secretary Bill Richardson at the Energy Department, giving us the official announcement on President Clinton's authorization to conduct a limited drawdown in the U.S. emergency oil stockpile. The process is to get under way on Monday. The energy secretary says it's good energy policy in the national interest. George W. Bush, you will recall, said it is bad policy. The energy secretary said this is not political, but John King at the White House, saying it's not political doesn't necessarily make it so?

JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: Well, it certainly won't stop the political argument, Lou. Already some Republicans saying this is election-year politics, an effort by the president to help his vice president by releasing some oil, trying to do something to lower prices just a bit at least for gasoline at the pumps, home heating oil in the Northeast, across the Midwest. In those parts of the country, many Republicans in favor of this.

This an issue that divides people more along regional than partisan lines. If you're from New England, if you're from the Midwest, even if you are Republican, you might support the president on this one, but look for the House Speaker, Denny Hastert, the Senate majority leader, Trent Lott, to echo their Republican presidential candidate George W. Bush in labeling this politics.

White House officials stressing this is not so much about prices, in their view, more about supply in the short-term. It's a million barrels a day for 30 days. The companies that purchase it will be required to give it back so the Strategic Petroleum Reserve will get back up eventually to its current total of 571 million barrels.

But this policy decision now made by the president, the first time since the Persian Gulf War that the reserve has been tapped, now will immediately become a very political debate -- Lou.

WATERS: More on this later. John King, at the White House,

Essentially, 30 million barrels to be drawn down from the strategic reserves. Beginning Monday, the process begins. Maybe more oil released in 30 days. We'll wait and see how the political debate and this whole process shapes up.

I'm Lou Waters at CNN center.

Now, back to "STREET SWEEP."



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