Energy Secretary Ernest Moniz said the federal government should tailor its cache of emergency oil supplies to meet the size of potential global supply disruptions. He advised against selling off the stash to fund other projects.
Moniz said he wants to look at increasing the capacity of the Strategic Petroleum Reserve and bolstering how much it can dispatch while making it more proactive rather than reactive to supply shocks.The U.S. is required to keep 90 days worth of net oil imports in the reserve, which has been tapped three times for oil emergencies since its creation in 1975 following the Organization of the Petroleum Exporting Countries embargo.
But recent flareups in the Middle East and in Europe, where Russia has destabilized its backyard partly because of its role as energy supplier to Central and Eastern Europe, have called for a rethink, Moniz said. He noted the Arab spring that began in 2011 tripled the amount of unplanned oil supply disruptions.
Moniz suggested the federal government should study changing the capacity levels to act as an “anticipatory” measure of global disruptions, saying that past oil price spikes have led to two to three years of weak economic performance. He also recommended the U.S. use the supply not just to stave off domestic fluctuations but also to soften the blow elsewhere.
“For example, if there’s a disruption that holds the promise of having a major economic dislocation not only for us but for the world, can we exercise our asset in an anticipatory way roughly speaking as opposed to, ‘well, let’s see how bad it gets,’ ” Moniz told reporters Monday at a Washington conference hosted by the Energy Information Administration, the Energy Department’s independent statistics arm.
The idea was proposed in the Quadrennial Energy Review the White House released in April. The Energy Department also called for new funding to enhance infrastructure needed to distribute oil from the reserve, as a 2014 stress test revealed bottlenecks.
Moniz’s comments come as lawmakers are already eyeing changes to the reserve.
Sen. Lisa Murkowski, R-Alaska, is pushing legislation that would study its size, international obligations and maintenance costs. But she and other Republicans are skeptical of the Obama administration’s past use of the reserve. Critics contend the Obama administration’s tapping of the stockpile in 2011 was designed to pacify voters in the run-up to President Obama’s re-election amid high oil prices.
“[It’s] not a safety net because you don’t like what the price of oil is or there’s something political going on,” Murkowski, who is chairwoman of the Energy and Natural Resources Committee, told reporters last month.
Policymakers also have wondered whether the Energy Department should sell off some of the 688 million barrels in the reserve given rising U.S. production that has made the country the world’s top producer. That’s partly because the nation’s obligations to maintain a reserve supply equal to 90 days of net imports have lessened as domestic production has replaced foreign crude.
“The recent shale boom is having a profound effect on United States energy policy. In fact, some policy provisions put in place as recently as 2007 are now at best irrelevant … in the case of the [Strategic Petroleum Reserve], estimates on size are no longer in line with current net imports,” Sen. Ron Wyden, D-Ore., said in an October 2014 letter encouraging a review for a potential sell-off.
The House Energy and Commerce Committee last month approved using the sale of crude from the reserve to fund the 21st Century Cures Act, including an extra $10 billion for the National Institutes of Health over five years.
Moniz, however, cautioned against selling off the reserves, saying it could leave the U.S. in the lurch if a broader geopolitical event were to roil the U.S. or its allies.
“The idea of using it for purposes which are unconnected to energy security, to security even more broadly, is a slippery slope particularly as we are still in the midst of this modern approach to energy security,” Moniz said.
