US to Keep Filling Oil Reserve Despite Price

ROME, April 22, 2008 (Dow Jones Newswires)

The U.S. believes current crude prices are too high for consumers globally, echoing many analysts and other governments, but will continue filling its strategic petroleum reserve despite record prices, U.S. Deputy Secretary of Energy Jeffrey Kupfer said Tuesday.

"We see no need to change the policy," he told journalists here at an industry conference.

Kupfer said the U.S.'s strategic oil reserve was a vital cushion needed in order to make up for any big supply interruptions in the future.

A growing chorus of U.S. policymakers have called on the Bush administration to halt oil purchases for the reserve with prices trading at record levels.

Kupfer said the U.S. believed oil prices -- which topped another new high Tuesday of $118 a barrel -- were being driven by a tight supply and demand balance.

During closed-door discussions at the conference here, Kupfer said he had urged ministers from the Organization of Petroleum Exporting Countries to "take a look at the fundamentals" but said at the 13-nation producer had "to make their own judgments" about whether to add more crude to global markets.

So far, OPEC, which provides about 40% of the roughly 86 million barrels currently consumed globally every day, has rejected consumer calls for more oil, arguing that high crude prices are unrelated to adequate supply and due more to factors like speculative trading.

Kupfer said the amount of oil the U.S. was buying to fill its oil reserve amounted to about a 10th of 1% of global production and, therefore, wasn't putting undue stress on world supplies.

Joining many top Democrats, Republican U.S. presidential candidate John McCain broke with President George W. Bush earlier this month and called on reserve purchases to be halted.

The U.S.'s petroleum reserve, with just over 700 million barrels of crude oil in underground salt caverns in Louisiana and Texas, are meant to be used to counter any major supply disruptions, like those after the hurricanes in 2005 that delivered a big blow to U.S. Gulf oil production. Congress developed the reserve in 1975 after the Arab oil embargo.

ROME, April 22, 2008 (Dow Jones Newswires)