SPR To Be Used To Raise Cash For US Gov
The U.S. Congress is moving on a budget deal to avert a standoff over raising the debt ceiling, at least until 2017. The emerging budget deal calls for some modest increases in government spending, including on defense, along with some tweaks to Social Security and Medicare.
But the budget deal contains a novel way to raise the funds needed to pay for the increase in spending: selling off oil from America’s strategic petroleum reserve (SPR).
The proposal calls for the sale of 58 million barrels of oil from the SPR, spread out over six years between 2018 and 2024. The Congressional Budget Office predicts the move will raise over $5 billion.
Related: Stop Blaming OPEC For Low Prices
The SPR was created in the aftermath of the Arab Oil Embargo in the 1970s, which led to price spikes, fuel rationing and long lines at gasoline stations. The SPR was to be used as a tool to ensure against supply disruptions. Tucked away in salt caverns along the Gulf Coast in Louisiana and Texas, the SPR holds an estimated 695 million barrels of crude.
Congress has traditionally been very reluctant to touch the SPR, and there has been a general consensus in Washington DC that it should only be used in very special circumstances. For example, the SPR was tapped following the Persian Gulf War in 1990-1991 and following damage inflicted upon Gulf of Mexico energy infrastructure from Hurricane Katrina in 2005.
Any effort on behalf of the government to sell outside of these unique situations tended to spark criticism. For instance, President Barack Obama was highly criticized for selling oil in 2011 during the Arab Spring when Libyan oil supplies were knocked offline, with detractors citing no urgent supply need.
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