Bill would allow $500 million emergency oil sale

A request by the Obama administration to sell $500 million in crude from the U.S. emergency oil stockpile was included in a spending bill released on Wednesday by the House Appropriations Committee, with a spring 2012 deadline to sell the crude.The Energy Department has to inspect and possibly repair some of the underground caverns that hold the 727 million barrels of oil in the U.S. Strategic Petroleum Reserve. Part of the oil has to be removed from the caverns so the inspections can be carried out, according to the department.

The draft legislation requires the Energy Department to sell the crude, about 5 million barrels based on current market prices, by March 1 of next year.

The White House request to sell the oil was included in its budget proposal sent to Congress in February for the 2012 spending year that begins this October 1.

However, a department official said the March 2012 deadline to sell the oil was not requested.

The deadline was added because without a date the Congressional Budget Office does not recognize the full $500 million in savings in the bill, a committee staffer said.

The reserve was created in the mid-1970s after the Arab oil embargo and holds America‘s emergency crude at four storage sites in Texas and Louisiana.

The House Energy and Water Subcommittee was scheduled to vote on the spending bill on Thursday. If passed, the full House of Representatives and Senate would eventually have to approve the SPR oil sale as part of the bigger budget, before a final spending measure could be sent to President Barack Obama for his signature into law.

If the SPR oil sale survives the congressional budget process and is enacted, the Energy Department would have a six-month window to sell the oil — between the October 1 date the 2012 spending year begins and the March 1, 2012, deadline for completing the sale.

An oil sale to inspect the reserve could provide Obama with an opportunity during the 2012 presidential campaign to put oil into the market and offer some relief to consumers if gasoline prices are still high.

Many U.S. lawmakers and consumer groups for months have urged the administration to tap the emergency stockpile to help ease the recent run-up in oil and gasoline prices. The president has refused, saying the reserve should be used for supply disruptions and not to control fuel prices.

 

WASHINGTON (Reuters) – By Tom Doggett(Reporting by Tom Doggett; editing by Jim Marshall and Lisa Shumaker)