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Clinton Taps Oil Reserves to Ease Shortage

TIMES STAFF WRITERS

The Clinton administration announced Friday that the government will sell 30 million barrels of oil from the nation’s Strategic Petroleum Reserve over the next 30 days to help damp down energy prices and assure an ample supply of home heating oil for the coming winter.

The announcement came just a day after Vice President Al Gore--reportedly worried that GOP candidate George W. Bush was about to take the initiative on oil policy--called for tapping the reserve.

“This is not political,” insisted Energy Secretary Bill Richardson. “We need to make sure that American families are warm this winter.”

But Republicans hammered at the decision, claiming it was purely an election season ploy to help Gore.

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“Ten months ago, the president and vice president thought it was a bad idea to release oil from the Strategic Petroleum Reserve,” said Texas Gov. Bush, campaigning in Tampa, Fla. “Now that we are 46 days away from the election, they’ve changed their minds. I agreed with them that it was a bad idea in the past, and I still think it’s a bad idea today.”

The reserve--crude oil stored in salt domes in Texas and Louisiana--should be used only in case of “a national emergency, a national war,” Bush said.

The 30 million barrels of oil, which will be sold at auction in a month’s time, represents a tiny fraction of the nation’s consumption of 19 million barrels daily. The oil actually will be swapped, with the companies that purchase it agreeing to replace the oil in the reserve later.

The administration has spent weeks of diplomacy trying to persuade the Organization of Petroleum Exporting Countries to increase production. One official said President Clinton announced the reserve oil sale in part to reassure OPEC that he was aiming his action at the home heating oil problem, not at seeking to increase total supply.

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By itself, the amount flowing from the reserve is too small to make a major impact on petroleum markets. But the act’s symbolism could help restrain prices. A much more important contribution is expected from members of OPEC, which has announced a production increase of 800,000 barrels a day starting Oct. 1.

Oil prices have dropped more than $2.50 a barrel in the last two days and near-term futures closed Friday at $32.68, with the declines anticipating the administration’s action. Prices had risen as high as $38 a barrel recently.

The nation’s Strategic Petroleum Reserve--571 million barrels--was created during the 1970s, after the United States was hit with an oil embargo by producing countries, resulting in long lines at gas stations and sharply rising prices. The reserve has been tapped only once in 25 years: in 1991 during the Persian Gulf War, when there was a spike in oil prices. Oil from the reserve also has flowed in tests to assure that the pipeline distribution system works properly.

White House officials said that the idea of tapping the reserve had been discussed for more than a month and that Clinton would have made the same decision regardless of Gore’s presidential campaign.

But they acknowledged that Gore was able to use his inside knowledge of White House discussions to call for the decision on Thursday--knowing that Clinton was already headed in that direction. And Gore’s speech accelerated the process by putting pressure on Clinton to decide quickly.

“We’ve been exploring various options now for well over a month,” White House spokesman Joe Lockhart said. “A rough consensus was reached over the last couple of days. It became clearer last [Thursday] night, and the president made the decision today [Friday].”

Officials said Energy Secretary Richardson, Gene Sperling, chairman of the National Economic Council, and others raised alarms in August about the low inventories of home heating oil and the potential effect on prices this winter.

They gave Clinton an initial set of options in late August and another set Sept. 10.

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That process touched off a furious debate--first on paper, then in a meeting with Clinton on Sept. 14--between Richardson, who proposed releasing 60 million barrels from the reserve, and Treasury Secretary Lawrence Summers, who criticized that idea as an attempt to manipulate prices.

It was clear at that point that Clinton wanted to do something, officials said, and word of the outcome quickly reached Gore.

A campaign official said the vice president was worried that Bush was about to take the offensive on the energy issue and wanted to move first.

So Gore phoned Clinton on Tuesday to tell him he was planning to call for using the reserve. On Wednesday he called White House Chief of Staff John Podesta to give him the details of his speech and make sure it would not conflict with the direction Clinton was going.

That spurred the White House to action. “Let’s get this done by the end of the week,” one official recalled Clinton saying.

Gore defended use of the oil reserve, saying that “the situation is different today” than earlier this year when he opposed its use. Campaigning in Vanport, Pa., Gore held his first news conference since July 17 and said that the justifications for using the fuel “are many and varied” and not limited to the type of national emergency pictured by Bush.

Besides, “some of these families are facing an emergency,” he said, referring to a group of about 50 local people he met Friday. Gore heard complaints from retirees, small-business owners and families faced with $1,000 heating bills as the price of home heating oil doubled from last year. This is the season in the Midwest and Northeast when many homeowners are ordering fuel supplies to fill their tanks at home.

The Gore campaign hopes that voters’ complaints about the oil industry can be turned into a dangerous issue for Bush. The Texas governor worked in the oil industry as a young businessman, and Dick Cheney, the GOP vice presidential nominee, was running Halliburton Co., the largest supplier of equipment to oil drilling businesses, when Bush named him as his running mate.

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Cheney, who was Defense secretary during the Persian Gulf War when oil was pumped from the reserve, said there is no justification now for similar action and attacked the Clinton administration’s decision as “an expedient, crass political move that frankly is not sound policy.”

“So having done absolutely nothing for seven years, with seven weeks to go in the race, they now all of a sudden get religion and want to tap the Strategic Petroleum Reserve to help Al Gore’s political problem at the polls because the public is worried about rising prices,” said Cheney, campaigning in Chesterfield, Mo.

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Times staff writers Edwin Chen, Megan Garvey, James Gerstenzang and Maria L. La Ganga contributed to this story from the campaign trail.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Getting Energized

With high prices at the pump and winter on its way, the major presidential candidates are making energy an issue. Democrat Al Gore proposed tapping the Strategic Petroleum Reserve, a move the Clinton administration approved Friday. Here are Gore’s and Republican George W. Bush’s ideas on energy.


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