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WASHINGTON -- Contributing to his low approval rating, President Bush received a clear message from both sides of the aisle calling for him to stop acquiring oil to store in Strategic Petroleum Reserve.
The Senate voted 97-1, with the House voting 385-25 in support of the measure. While a clear answer to the unprecedented oil costs, which on Tuesday hit $127 per barrel, legislators are quick to point out that the measure will have little impact on the pains felt at the pump.
"It's not going to bring prices down to where people want to see them, I guarantee that," Senate Energy Committee Chairman Jeff Bingaman, (D-N.M.), told The Wall Street Jounral on the eve of Tuesday's vote. "It's a modest step in the right direction; it's not the solution to high oil prices."
The Wall Street Journal reported the White House said the president would not veto the Senate directive. On the eve of the vote, Bush traveled to the Middle East to meet with Saudi Arabian leaders in hopes of convincing them to pump more crude. Bush's last visited to the region was in January, since that time oil prices have spiked by more than $30 a barrel.
Last month, the president told reporters the administration was acquiring the equivalent of 70,000 barrels of oil a day, which is less than one tenth of one percent of the 85 million barrels of oil consumed globally each day -- a metric, he said, that has little impact on oil prices.
Conceived in 1974, the Strategic Petroleum Reserve (SPR) is a network of salt caverns along the Gulf Coast where the government began stockpiling oil in the wake of the Arab oil embargo. Currently the reserve is 97 percent full, containing roughly 703 million barrels of oil. The Bush Administration has defended its policy citing national security concerns.
"The SPR is an insurance policy," Keith Hennessey, a top economic-policy adviser to Bush, told The Wall Street Journal. "Just because your budget is being squeezed doesn't mean you stop paying your insurance policy."
In response to the vote, DTN senior analyst, Darin Newsom said, "Futures spreads in crude oil are in backwardation, but weakening indicating a less bullish supply and demand situation longer-term. The SPR news would theoretically have the opposite effect, as it calls for putting more crude oil on the market and less in reserve."
The Energy Department's Energy Information Administration’s weekly report stated that for the week ended May 9, inventories of gasoline fell by 1.7 million barrels, or 0.8 percent, to 210.2 million barrels, which were 5.9 percent above year-ago levels. According to Platts, the energy research arm of McGraw-Hill Cos., analysts expected stockpiles of gasoline to fall by only 800,000 barrels.
For consumers, all arrows point to the pump. The Associated Press reported yesterday that gas prices rose nearly 3 cents overnight to a record high national average of $3.76 a gallon, well above the year-ago average of $3.09 a gallon. Diesel prices also set a record of $4.42 a gallon.
"Futures spreads in gasoline remain in backwardation, steady trend but not weakening indicating expected seasonal growth in demand," said Newsom. "Market tends to put in a seasonal top in early July."