To Tap, Or Not To Tap? Energy Secretary Says Decision Is Imminent Gore, Bush Spar Over Whether Tapping Reserves is Right Approach World Bank Warns Oil Crunch Could Cripple Economies NEW YORK, WASHINGTON and CARACAS, Sept. 21, 2000 Thursday, September 21, 2000 - 09:31 PM ET (CBS) With a presidential election only weeks off and a cold winter mere months away, a decision by President Clinton on whether to tap the nation's strategic oil reserves is now a political issue as well as a policy decision, reports CBS News Correspondent Bob Orr.

As candidates Al Gore and George W. Bush clashed on energy policy, U.S. Energy Secretary Bill Richardson said the president's decision on whether to release any oil was "imminent."

Testifying before the House Government Reform committee, Richardson delivered a bleak winter forecast that home heating costs would go up all across America.

"There's a real acute home heating oil shortage in the Northeast, we're very worried about it," Richardson said.

The Energy Department says a family in the Northeast heating its home with fuel oil can expect to pay $901 this winter74 percent more than the average two years ago, $518.

Far more people heat with natural gas, but their bills will be nearly as high: A Midwestern family can expect to pay $734 this winter for natural gas heat, up 43 percent from 1998, when they paid $514.

That is why "the president is actively considering" a release of oil from the Strategic Petroleum Reserve, Richardson said, but then cautioned, "He may decide not to tap it."

Richardson told the panel the administration has been "very reluctant" to release oil from the 570 million barrel stockpile in the past. It has been called done only once before, during the crisis over Iraq's 1990-91 occupation of Kuwait.

At a campaign stop in Hollywood, Md., Gore, whose staff has been included in the administration's deliberations over how to address the crisis, urged the president to release 5 million barrels to see if that would lower prices, and continue to release oil if it proved successful.

Republican rival George W. Bush called Gore's proposal an "election-year ploy."

Legitimate or not, it may resonate among voters. An April Associated Press poll found that 59 percent of those surveyed approved tapping the reserves to ease the oil crunch, to 36 percent who opposed the move.

Analysts say oil prices could quickly drop if the president taps the reserves. Energy analyst John Kilduff said releasing a million barrels a day for a month "would help bring prices quickly down into the upper 20s."

About the Strategic Petroleum Reserve CREATED: By President Ford on December 22, 1975 when he signed the Energy Policy and Conservation Act LOCATION: There are storage areas at Baton Rouge and Lake Charles, La. and Beaumont and Freeport, Texas. INVENTORY: Has enough oil to service America's economy for 59 days. At one point in 1985, it could cover 118 days. RELEASE: Law dictates the oil would be released through competitive sale. The reserve could sell a maximum of 4.1 million gallons a day. IMPACT: Oil released from the reserve would take 15 days to reach consumers. GULF WAR RELEASE: 21 million barrels in August 1990 and January 1991 (Souce: DOE) However, a recent memo from Treasury Secretary Lawrence Summers advised Mr. Clinton that opening the reserve "would be a major and substantial policy mistake," The Wall Street Journal reported Thursday. The document said Summers' objections were shared by Federal Reserve Board Chairman Alan Greenspan.

On news the president was considering tapping the reserveswhich would increase supply and likely decrease the price of oiloil futures prices retreated somewhat Thursday. U.S. light crude oil for November was off $1.29 to $33.95.

But that price may still be too high. World Bank President James Wolfensohn said oil prices of more than $30 a barrel could hurt all economies, and prove especially harmful to import-dependent poor nations. That echoed a warning by the International Monetary Fund earlier this week.

Many analysts blame the rise in prices on low oil supplies. Richardson said Thursday that the United States will urge the Organization of the Petroleum Exporting Countries (OPEC) to again consider ramping up oil production.

OPEC has announced it will boost its output by 800,000 barrels-per-day in October.

However, some OPEC members are urging the cartel to proceed with caution before adding more supply.

"For us, prices are fair, not high  It's not true that supply is lower than demand," President Hugo Chavez said on Venezuelan television.

OPEC President Ali Rodriguez, who is also the Venezuelan energy and mines minister, agreed.

"Right now, overproduction is about 2 million barrels per day," Rodriguez told reporters before a meeting with a local business chamber.

Domestic producers are also feeling the heat as oil prices rise.

U.S. oil and natural gas companies are increasingly concerned that current high prices for both fuels could trigger government intervention, possibly in the form of a tax on windfall profits. Industry executives warn that any such action would have an adverse effect on supplies by reducing the incentive to find and produce more oil and natural gas. Copyright 2000 CBS

http://www.wbz.com/now/story/0,1597,235327-364,00.shtml

-- Martin Thompson (mthom1927@aol.com), September 21, 2000