President Donald Trump’s budget released Tuesday proposed radically downsizing the US Strategic Petroleum Reserve, arguing that America’s shale boom has lessened the need for an emergency stockpile.
Trump’s proposal would sell off half the oil in the SPR, an emergency storage facility created amid the energy shocks of the 1970s.
Slashing the reserve would raise an estimated $16.6 billion through 2027, part of a budget plan that slashes social spending programs and many government departments, while boosting defense spending and border security.
The budget proposal said US oil production has risen and the share of US oil imported from OPEC countries has fallen sharply compared with the 1970s, so cutting the SPR in half “would very likely provide sufficient protection in the event of an energy crisis.”
“A path to energy security means enabling more American production and investment, not having the Government store an unnecessary large amount of oil underground,” the document said.
The crude oil stockpile is stored in underground salt domes at four sites in Louisiana and Texas, and currently holds about 688 million barrels, equivalent to more than 140 days of imported oil supply.
The SPR already had been slated for some reductions, after Congress reached a short-term budget deal in December 2016 that allowed DOE to sell up to $375.4 million in oil this year.
The Trump plan would allow DOE to sell about 270 million barrels, “roughly half of what remains” after already-planned sales, which would allow the Energy Department to shutter two of the four storage facilities.
Critics of the proposal included Columbia University professor Jason Bordoff, a former energy aide to former President Barack Obama, who said on Twitter that selling the oil would be “foolish,” especially at today’s relatively low prices.
But T. Boone Pickens, founder of BP Capital and a veteran of the US oil industry, said on Twitter that it was “good to re-examine 40-year-old energy programs” and recommended reducing the SPR over 10 years to avoid disrupting oil markets.
US oil prices finished at $51.47 per barrel Tuesday, up 34 cents. The average price of the crude in the SPR is $29.70.
The proposal comes just as OPEC oil producers are due to meet to try to extend an agreement limiting output meant to boost oil prices, so the prospect of more oil on markets will not be welcome. However, the sales of crude from the reserve likely would be too gradual to impact world prices.
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