OIL RESERVE RESERVATIONS

President Bush Tuesday asked the Organization of Petroleum Exporting Countries to release more oil onto the market to lower prices. Before looking for international solutions, the president should ensure his policies aren’t driving up costs. Immediately, he should ask the Department of Energy to reassess its ongoing purchases of oil for the nation’s strategic petroleum reserve. For the future, requiring more renewable energy production and conservation measures would help even more.

At a congressional hearing last month, Philip Verleger, an oil economist, told lawmakers that neither international events, growing demand nor a global shortage were responsible for a rapid rise in oil prices that began in August. The one significant change Mr. Verleger saw this year was the DOE’s decision to restart delivery of oil to the country’s Strategic Petroleum Reserve.

Purchases for the reserve were suspended by Bush in April 2006 to boost supplies of gasoline. Last August, the DOE resumed deliveries, with more than 5 million barrels of oil acquired through November.

In 2005, in response to concerns that the DOE was buying oil when prices were high and supplies were tight, Sens. Susan Collins and Carl Levin authored an amendment to the energy bill that put restrictions on purchases for the reserve. Under the law, the department must “avoid incurring excessive cost or appreciably affecting the price of petroleum products to consumers.”

Sen. Collins last week joined Levin, D-Mich., Sens. Norm Coleman, R-Minn., and Connecticut independent Joe Lieberman in asking the DOE to temporarily stop purchases for the reserve.

“DOE is buying oil when prices are nearing record highs and supplies are tight, taking valuable oil off the market at the very time more supply would ease prices,” the senators wrote in a letter to Energy Secretary Samuel Bodman. Further, they wrote, “DOE has presented compelling justification for this course of action which disregards significant impact of the SPR fill program upon oil prices, consumers and the U.S. economy.”

The department plans to acquire an additional 13 million barrels of oil for the reserve in the first six month of this year.

This is a small fraction of OPEC’s output. The group pumped an average 32 million barrels per day last month, according to Bloomberg reports. Saudi Arabia has held back about 2 million barrels a day of oil that could be supplied to the market if needed, Saudi Oil Minister Ali al-Naimi said.

Still, taking oil off the market to add to the U.S. reserve doesn’t make sense when the president is asking others to release more.