President Trump’s budget proposal seeks to sell off half of the nation’s 40-year-old crude oil reserve, deeming it no longer necessary with increased production from fracking, said Office of Management and Budget Director Mick Mulvaney.
Mulvaney assured reporters Tuesday that selling off the Strategic Petroleum Reserve would not result in broad swings in fuel prices because it will be done gradually.
“If you do it slowly, if you telegraph it over the course of time, there is a way to do it without having a dramatic impact on prices,” Mulvaney said.
The budget proposes to sell off the reserve over the next decade to cut the deficit by $16.6 billion. It would reduce the size of the reserve by about half, or 270 million barrels, from the roughly 688 million barrels now in the reserve.
Congress already targeted the oil reserve to fund programs under a healthcare innovation bill it passed last year called the Cures Act. It is not clear how the administration’s deficit priorities will jibe with Congress’ plans that are already in motion.
The reserve was established 40 years ago in response to the Arab oil embargo.
“At that time, I think we were importing over 6 million barrels a day from the Middle East, and we had limited domestic production,” he said. But the risks associated with imports “goes down dramatically when we have increased domestic production” from fracking that “we do today.” Congress last year approved crude oil exports from the U.S., he noted.
“We think it’s a responsible thing to do,” selling the reserve, Mulvaney added. “It is no longer necessary.”
Mulvany said using money to “bury it in the ground in West Texas some place for national security reasons” is no longer a responsible way to spend tax revenue, especially “when we have increased domestic production.”
The Department of Energy manages the oil reserve on the Gulf Coast and will conduct the sales.
