NEWS MEDIA CONTACT: FOR IMMEDIATE RELEASE
Mary Joy Jameson, 202/586-5806 January 16, 1991
PRESIDENT DIRECTS DRAWDOWN OF STRATEGIC RESERVE
President Bush tonight authorized the Secretary Of Energy to drawdown the
Strategic Petroleum Reserve (SPR).
President Bush's authorization tonight to begin releasing government-owned
oil stocks is part of an international effort to minimize world oil market
disruptions caused by Middle East hostilities. In response to the President's
finding, Secretary Watkins immediately ordered the Department to implement a
drawdown of 33.75 million barrels of oil, equivalent to a drawdown of
1.125 million barrels per day.
In announcing plans for using the SPR, Secretary Watkins emphasized that he
does not anticipate immediate oil shortages due to the current situation.
"By drawing on our strategic stocks, the U.S. is working in close cooperation
with its partners in the International Energy Agency (IEA). Our purpose is to take
precautionary action early and in doing so, counter any possible disruption of supplies
from the Persian Gulf," Watkins said.
Watkins said the U.S. action will be joined by similar stock drawdowns from
13 other nations, including Germany and Japan.
"Acting collectively, the U.S. and its allies intend to reassure the world
market," Watkins said. "Consumers should not have any concerns about the
availability of petroleum and petroleum products. The SPR was envisioned for
exactly the situation we have today. Now is the time to begin taking advantage
of the investment we have made in it."
Concurrently with the authorization to use the SPR, the President directed
the Secretary of the Treasury to waive provisions of the Jones Act that require
the use of U.S. flag vessels to transport crude oil from the Reserve. The general,
or "blanket," waiver will ensure that the widest range of transportation opportunities
is made available for moving SPR oil into all parts of the U.S. market.
"We anticipate releasing 33.75 million barrels of crude oil from the SPR which
is equivalent to a drawdown of 1.125 million barrels per day over a 30-day period.
This rate is about a third of the Reserve's maximum oil distribution capability of
3.5 million barrels per day that could be called upon should the situation warrant
in the future," Watkins said.
Under the international coordinated effort, the 1.125 million barrels per day
is the U.S. share of 2.5 million barrels per day to be made available by OECD nations,
as agreed to on January 11 by the IEA's governing board.
The IEA will meet again in 10 days to reassess the world oil supply situation
and determine whether additional measures are necessary.
Last October and November, the Energy Department ran a test of the Reserve's
oil sales and distribution process. Although today's announced action will
withdraw more than six times the amount of crude oil sold in last year's test,
Watkins said that the exercise gave both industry and the Department increased
confidence that oil could be moved into the market efficiently and quickly.
Watkins said that the release of government-controlled oil inventories
should send a clear signal to oil markets that supplies will be adequate. This
should minimize price increases and inventory buildups.
"If I had a message to markets right now," said Watkins, "it would be to
base their decisions on facts such as we are announcing today, rather than
on unsubstantiated rumors and fears."
The first oil from the reserve could enter the U.S. market within
sixteen days. Due to normal industry and pipeline and vessel scheduling
requirements, the bulk of the oil will likely be delivered late in February
or in March. Earlier deliveries could occur depending on purchasers' ability
to schedule transport.
- DOE -
R-91-009
