Obama, GOP Want To Sell Off 40 Percent Of US Strategic Oil Reserves To Fund Gov’t Programs

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Michael Bastasch DCNF Managing Editor
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Lawmakers are pushing legislation that could result in the selling off of 266 million barrels of oil from the country’s Strategic Petroleum Reserve (SPR) over the next decade, mostly to fund more government spending.

Legislation for health care, highway funding and financing the government could end up drawing on down on oil supplies meant for emergency situations. If all three bills are signed into law, some 266 million barrels, or nearly 40 percent, of the current 695 million barrel SPR would be sold off in the next decade to raise about $23 billion.

“The 114th Congress has introduced three separate bills that would fund non-energy policy goals by mandating crude oil sales from the Strategic Petroleum Reserve,” according to an analysis by the consulting firm ClearView Energy.

ClearView noted the health care bill, called the 21st Century Cures Act, was the least likely to hit President Barack Obama’s desk despite passing out of the House with a veto-proof majority. On the other hand, the two other bills passing a budget and funding highways are more pressing issues to Republican and Democratic lawmakers. Just those two bills alone would draw down on 186 million barrels.

“Elected officials could face grave political penalties for failing to raise the debt ceiling or fund highway construction, but voters aren’t likely to notice the absence of [200 million barrels] of crude oil from salt caverns they can’t see,” ClearView noted.

“Moreover, swollen global inventories and falling oil production system capacity utilization tend to blunt the edge of geopolitical risk, which probably makes it easier for Congress to drill for dollars in the SPR,” the consulting firm added.

Calls to sell of SPR oil come amid a resurgence of crude oil production in the U.S. thanks to hydraulic fracturing and horizontal drilling. As crude output has boomed, U.S. lawmakers have called for a repeal of the crude oil export ban and other policies to help keep America’s energy boom going.

But a consequence of the fracking boom is the SPR has lost some of its importance. With booming crude production, lawmakers can politically afford to sell strategic oil reserves to fund government programs.

The White House called the budget bill “a responsible agreement that is paid for in a balanced way.”

Republican leadership negotiated the budget deal behind closed doors with White House officials and Democrats. The budget bill includes about $80 billion in spending increases — about $76 billion of which are offset by spending cuts and revenue increases, according to the Congressional Budget Office.

Some Republican lawmakers are hesitant to support the budget, citing concerns over backroom dealings and that not all spending increases are offset. Some lawmakers were furious about their prized programs being cut, like federal crop insurance.

“Make no mistake, this is not about saving money. It is about eliminating Federal Crop Insurance,” said Texas Republican Rep. K. Michael Conaway said in a statement. “The House Agriculture Committee was not consulted regarding any changes to policies under the jurisdiction of our committee.”

It’s also unclear where key Republicans stand on selling off oil reserves to fund new government programs. Alaska Sen. [crscore]Lisa Murkowski[/crscore] has criticized such sales in the past, calling them “short-sighted.” This time around, however, Murkowski has been silent.

“Chairman Murkowski is currently reviewing the budget proposal as it relates to selling off oil from our strategic energy and national security asset – the Strategic Petroleum Reserve,” Michael Tadeo, Murkowski’s spokesman said in an emailed statement to reporters.

“As the budget process advances, we will further evaluate steps needed to update our nation’s energy and natural resources policies,” Tadeo said.

The SPR was created by President Gerald Ford in 1975 to improve America’s energy security should the country face another devastating oil embargo, like the one the Arab’s imposed in 1973 over U.S. support for Israel.

The SPR is the world’s largest supply of emergency crude oil with a capacity to hold 713.5 million barrels of oil.

Current legislative proposals to sell off oil aren’t the first non-emergency drawdowns to occur in recent years. In 2011, Obama sold 30 million barrels to offset potential price increases caused by the Libyan civil war — the sell off had negligible, temporary effect on oil prices.

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