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The Rude Awakening
Wall Street, New York
Wednesday, August 31, 2005
Publicly, the White House urges calm and predicts that oil prices will retreat from their current high levels. But privately, the U.S. government is quietly planning to add to existing oil reserves at a furious pace.
Squirreled away in new energy legislation is a directive to increase the Strategic Petroleum Reserve from 700 million barrels (70 days' supply of imports) to ONE BILLION BARRELS. They're adding to the SPR when oil prices are sky-high. What are they afraid of?
A confidential source in the Department of Energy gave me the scoop on the addition to the SPR. This stunning new directive was placed inside the 1,724-page Energy Policy Act of 2005 without any fanfare whatsoever – it's hidden in plain sight. And the mainstream media is too busy going to beltway cocktail parties to notice.
This 42% jump in reserves is so huge, the government doesn't even have a place to put it all – yet. The plan is to fill the SPR to capacity with a minimum of market disruption or undue influence on the market, blah-blah. If you're planning to fill the SPR when oil is over $60 per barrel, you aren't planning on getting that oil on the cheap.
I don't know what is motivating the Bush administration to boost petroleum reserves. But I do know that two oil men are in the White House right now. They probably have access to raw data on America's oil fields – including depletion rates – that the rest of us don't. Again, what are they afraid of? I'm certainly not going to buy the "don't' worry, be happy," line peddled by the White House.