September 22, 2000
Energy Secretary Bill Richardson talks about the decision to release 30 million barrels of oil from the strategic reserve.
JIM LEHRER: The oil decision, and to Energy Secretary Bill Richardson. Mr. Secretary, welcome.
BILL RICHARDSON, Secretary of Energy: Thank you, Jim.
JIM LEHRER: Was there one particular thing that caused the president to finally make this decision today?
BILL RICHARDSON: Yes, he made the decision today after a unanimous view of his advisors that we have a potential home heating oil shortage -- disruption coming this winter. We have got 40 percent less stocks than we did exactly one year ago, and in New England, and the East Coast, as high as 60 percent fewer stocks. So what we're concerned about is a lack of oil and home heating oil out in the market and potential disruptions; people having problems, not just paying their bills, but not having enough home heating oil. So for this reason, the president directed me to take what is called, Jim, a swap -- this is not a sale of the reserve, because we get that oil back into the strategic petroleum reserve. We have 571 million barrels there. We go for 30 days, one million barrels per day. We reassess after 30 days. Our objective is to replenish our crude oil stocks, our home heating oil stocks, and try to deal with the tightness in the market. You know, a year ago oil prices still too high were in the high 20s. They've reached up to 38 in the last week. So there's too much volatility in the market. And this is an international problem. It's not just us.
JIM LEHRER: Well, when -- the 30 million barrels figure, where did that come from? Is that an arbitrary figure, or is that aimed -- do you believe that will actually solve this problem?
BILL RICHARDSON: We believe that that number, Jim, one million a day for 30 days, is a swap... in other words, a swap works like this. We put out solicitations next week, we the Department of Energy. Some companies or some entities purchase the oil at 38 or 35, or whatever it is on Monday or Tuesday when a contract is signed, and then target it to the futures market when, for instance, in the year 2001, it might be at 26. So you make some money, you replenish the stocks.
JIM LEHRER: Who makes the money?
|A sound business decision|
BILL RICHARDSON: Whoever is speculating. And what happens many times, Jim, is you're replenishing the stock. In other words, it's not a sale of the reserve the way we did in other occasions, in the Gulf where you had to sell and you don't get the barrels back. So it's a sound business decision. We think that it's temporary. It's precautionary. It is not national policy to use -- we've used it very sparingly. I think in your earlier debate, a year ago, we were at different circumstances. Home heating oil stocks were considerably higher then; the price was high, but again we rejected a lot of calls for using the strategic petroleum reserves. What we're doing is temporary; it's precautionary; it's geared at disruptions, not manipulating prices. We don't want to do that. We've never done that.
JIM LEHRER: Well, you want the prices to go down, though, don't you?
BILL RICHARDSON: Well, yes.
JIM LEHRER: Isn't that manipulating prices?
BILL RICHARDSON: No. It's not aimed at that. But clearly what we would like to see is stability in the market. We think that between $20 and $25 is the ideal price, but so does Saudi Arabia; so do OPEC countries. And so what you have is despite actions by OPEC to increase production as they have three times in the last year, there isn't enough oil out in the international market to satisfy a huge demand, a huge increase in demand, Jim. Just in this country demand has increased in the last few years by 14 percent because of the booming economy.
JIM LEHRER: So, in an ideal world, after 30 days, what happens? What will have happened to the oil market?
BILL RICHARDSON: What we think will happen, Jim, is from three to five million dollars -- if refineries operate effectively with this measure -- we will get three to five million barrels more of home heating oil, which deals with replenishing our stocks. We hope the price will start becoming more stable, hopefully at a lower level. I think even the OPEC countries think that 38 is much too high. And have you, for producer and consumer countries, a table price within $20 to $25. Our objective though is to deal with a potential disruption, not an emergency. We're not trying to panic people right now. But if you look at home heating oil stocks at this stage a year ago, we're heading into winter. It's supposed to be a tough winter. We want people to have enough home heating oil fuel. There are a lot of poor people out there. The East Coast is vulnerable because one-third of their energy is home heating oil. Other parts of the country are affected, too. This is why the president decided to act. This is why the president directed his advisors to come up with a plan that is precautionary, that is temporary. It's not an outright sale. It's not massive. It's one that deals with the existing problem.
|A political decision?|
JIM LEHRER: All right. You said today it wasn't political. So let's go through this a moment -- for a few moments. What part in this decision did Al Gore play in his public calling on the president to do what he did today? How important was that in the final analysis?
BILL RICHARDSON: Well, the vice president made some very good, interesting proposals. The president ultimately chose the proposal of 30 million barrels per day for 30 days. I think the vice president had the test...
JIM LEHRER: You mean a million a day for 30 days right.
BILL RICHARDSON: A million a day for 30 days.
JIM LEHRER: Right.
BILL RICHARDSON: But the vice president was for the swap. He also made some other good proposals. You know, he's part of the administration. His advisors were part of the discussions, but if you look at the last few weeks, we've been intensively debating this issue at a time when prices went up to $38 a barrel. You have got truckers in terrible shape. You've got an economy right now that is a bit affected by this, not the way it did in the '70s. And so you've got somebody like the energy secretary looking at home heating oil stocks for the winter, and you have half today that you did a year ago, and a year ago we were in bad shape. We almost had disruptions. We made that recommendation to use the reserves.
JIM LEHRER: Did you know beforehand that Vice President Gore was going to go public in urging you and the president to do this?
BILL RICHARDSON: No, no, I didn't. And again
JIM LEHRER: Is that upsetting to you?
BILL RICHARDSON: No, I think that this is the political season. But I think what the vice president said is a view that I shared. A year ago I was against using the reserve because there were different circumstances, despite the calls from a lot of members of Congress on a bipartisan basis -- and I should say Jim, that there are a lot of Republican Congressmen from the Northeast and other parts of the country that are applauding the president's move. So I'm not sure this is like a political issue as some are casting it.
JIM LEHRER: The Washington Post... we had earlier in the News Summary what Governor Bush has said. He said it was nonsense; this was politics short-term. Let me read you what The Washington Post said this morning in an editorial. "It's a bad idea, a dramatic gesture that might do the candidates some political good in the short run, while setting a precedent that could do the country harm in the long run."
|Judicious in use of the reserve|
BILL RICHARDSON: Well, first of all, we have not used the strategic petroleum reserve except for purposes like this where we seriously look at a potential home heating oil stock shortage and going into this winter. Secondly, we have been very judicious in the use of the strategic petroleum reserve. I think it's important that this measure also be viewed as we're replenishing the strategic petroleum reserve. We're not selling to affect prices. We're swapping on the futures market. This has been tested before. It works. It's something that has sound business management. I think if you see a lot of the reaction coming not just from consumer groups and members of Congress, but some of the oil trade analysts, they believe that this is a justified action. And our objective here is not a political... we've been debating this for the last three weeks intensively. And the president today reached a decision.
JIM LEHRER: This would have happened had there been no race for president with Al Gore as the Democratic nominee?
BILL RICHARDSON: Absolutely. Jim, when you have home heating oil stocks one-half of what they were exactly a year ago in the Northeast, an area dependent heavily on home heating oil, you've got prices at $38 a barrel, you've got natural gas prices high. You have got an international situation. You've got France; you've got Britain, and Japan, all railing from very, very high energy prices - a huge increase in demand. You know, the Asian economies are getting stronger. Europe is recovering economically. Our economy is booming, so you've got this dramatic increase in demand for energy. And you've got an energy situation where we are right now at 75... the world consumes 75 million barrels per day. And we're only producing about 73. So despite OPEC's sound decisions to increase production the last three times they've met, it hasn't been enough.
JIM LEHRER: Give us, finally, Mr. Secretary, some kind of guideline for how we should test whether or not the strategy works. When should there be some effect? When should we see it if your idea works?
BILL RICHARDSON: Well, hopefully the market will react positively next week on this. Now we didn't want to make the announcement during the market. We were very careful. We made it after the market closed late this afternoon. I made the announcement not at the White House to dramatize it; it's part of the management of the strategic petroleum reserve. So hopefully next week the market will react positively. I don't want to get into numbers
JIM LEHRER: You mean with the price going down.
BILL RICHARDSON: Yes, and at the same time, Jim, you will start giving incentives to home heating oil operators to stock up on their reserve of home heating oil. We will start building the stocks for home heating oil, and we predict that this action will increase the stocks maybe three to five million barrels, which will get us perhaps out of a dangerous zone of potential shortages. This is not an emergency, but we are planning to prevent a future emergency. And this is why the president took this action now.
JIM LEHRER: All right, Mr. Secretary, thank you very much.
BILL RICHARDSON: Thank you, Jim.