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Trump's idea to drain half of America's emergency oil reserve so far finds few takers

The White House's focus on the stockpile could still spur a closer look at an enduring vestige of the 1970s.

WASHINGTON — A Trump administration proposal to sell off half of America's emergency oil stockpile is so far proving to be a dry hole.

Months after the White House floated the drawdown of hundreds of millions of barrels from the Strategic Petroleum Reserve that's partially stored in Texas, Congress has paid little mind to what would be a dramatic shift in U.S. energy and national security policy.

Budget writers have ignored the measure. Key committees haven't given it much time. And even lawmakers open to the idea see folly in dumping the reserves when oil prices are so low.

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"One of the basic laws of economics is buy low and sell high," said Rep. Joe Barton, an Arlington Republican who has long served on the House Energy and Commerce Committee. "I wouldn't be selling it off at $40 a barrel."

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But the White House's focus on the stockpile could still spur a closer look at an enduring vestige of another era. Which isn't a bad idea, experts said.

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There's concern that politicians too often use the reserve as an ATM for budget needs. There's the question of how useful the store has been in alleviating emergencies. And there's the reality that the U.S. is the midst of an oil production boom that's reduced its need for foreign stock.

One way to sum up the conundrum is the simple fact that it was only a decade ago that policymakers were clamoring to increase — not decrease — the reserve.

"Given how the oil market has changed over the last 40 years, there is a legitimate discussion to have about the optimal size of our strategic reserves," said Jason Bordoff, director of Columbia University's Center on Global Energy Policy.

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Texas Rep. Joe Barton, R-Arlington, says there should be some reserve but maybe "not the...
Texas Rep. Joe Barton, R-Arlington, says there should be some reserve but maybe "not the amount we have in it now."(David Woo / Staff Photographer)

Congress created the Strategic Petroleum Reserve in the wake of the Arab oil embargo of the early 1970s.

The idea was to inoculate the U.S. and other partners from such calamities, whether natural or geopolitical. While no store could totally stop the effects of an emergency shortage, the reserve could alleviate some pain from future disruptions.

Officials settled on underground salt domes along the Gulf Coast to house the reserve, putting it in close proximity to pipelines, marine terminals and refineries. Four sites are split between Texas and Louisiana, with the Lone Star State pair sitting near Freeport and Beaumont.

The store, which has bipartisan support, now holds around 700 million barrels of oil.

Emergency sell-offs of the reserve have been relatively rare, though the stock is also sometimes used to loan oil in cases of temporary interruptions. Notable releases have come thanks to the Persian Gulf War, Hurricane Katrina and tensions in Libya in 2011.

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Stockpile as piggy bank

But increasingly, the stockpile is serving a different kind of purpose.

"It's really being used as a piggy bank," said Richard Newell, a former director of the U.S. Energy Information Administration.

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Policymakers have started tapping the reserve in recent years to pay for deficit reduction, budget holes and legislative proposals like a transportation funding bill. And that kind of use has only stoked discussions about the proper role of the Strategic Petroleum Reserve.

Energy Secretary Rick Perry said the reserve is less needed if you "consider pipelines to be...
Energy Secretary Rick Perry said the reserve is less needed if you "consider pipelines to be a form of storage." (Jacquelyn Martin / AP)

One idea: dispense with the stockpile altogether.

"We don't think it's the government role to carry any type of reserves for any energy sources," said Nicolas Loris, an energy expert at the conservative Heritage Foundation.

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That approach — nodded at in the White House's idea to sell off 270 million barrels — comes amid the dramatic change that the shale oil revolution has brought to the U.S. energy industry. Some experts say that increased domestic capacity better allows the market to adjust on its own.

Energy Secretary Rick Perry has defended the administration's plan, which would use the sale to trim the national debt, by arguing that you could "consider pipelines to be a form of storage."

"If we are building more pipelines in this country so that we have better transportation ... maybe that does soften a little bit your concern about reducing some of the supplies," he said.

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Former Energy Secretary Ernest Moniz has defended the reserve, saying that oil "in the...
Former Energy Secretary Ernest Moniz has defended the reserve, saying that oil "in the ground can't provide us oil we need in an emergency disruption." (Chip Somodevilla / Getty Images)

Is stockpile really needed?

But some experts disagree that the new normal means the emergency stockpile should go.

Perry's predecessor, Ernest Moniz, wrote in a recent op-ed that oil "in the ground can't provide us oil we need in an emergency disruption." Others said that efforts to drain the reserve overlook the deterrent effect it has on other countries that might use oil supplies as a weapon.

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Newell, the former Energy Information Administration chief, said that research has shown that even though the U.S. market is much more price responsive, "it's not fast enough."

"It just takes a while to drill a well and bring it to production," said Newell, now president of Resources for the Future, an energy think tank.

That means the search for magic stockpile number continues, even as efforts are underway to modernize the reserve and as unrest continues in oil-rich places like Venezuela. And so experts said it's worth diving deeper into when and why the reserve has been most effective.

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"We should have some reserve," said Barton, the Texas Republican. "I don't know, given our ability to produce oil, that we need the amount that we have in it now."