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Energy Department asks Bush to set aside more oil for strategic reserve


WASHINGTON (AP) _ With oil prices declining, President Bush is expected to order the government to put an additional 100,000 barrels of oil a day into its emergency stockpile.

While some details remain to be worked out, the Energy Department proposal is awaiting final approval from the president, with a decision expected soon, according to administration officials who spoke on condition of anonymity.

Private economists said the move, in addition to boosting emergency reserves, will signal U.S. intentions to help stabilize world oil prices at a time when OPEC producers _ including Saudi Arabia _ have been worried about the sharp drop in global demand.

The proposal calls for funneling an additional 70 million barrels of crude into the government's Strategic Petroleum Reserve over the next two years, with most _ if not all _ of the oil to be provided by companies in lieu of federal royalty payments.

While Congress would have to provide money for any additional direct purchases, an executive order could allow ``royalty-in-kind'' purchases immediately.

The strategic reserve, a string of salt caverns along the Gulf Coast at the Texas-Louisiana border, currently has 543 million barrels of oil, with the capacity to hold 700 million barrels.

An additional 48 million barrels is expected to be put into the reserve by the end of next year under existing arrangements.

Just recently, the administration responded with little enthusiasm to a House-passed resolution urging stepped-up purchases for the oil reserve. Some officials said the administration was concerned that large oil purchases would drive up prices.

But in recent weeks, world oil prices have tumbled because of a sharp drop in demand caused by the worldwide economic decline and exacerbated by the Sept. 11 terrorist attacks. OPEC oil ministers have threatened to curtail production in an attempt to boost prices when they meet Nov. 14.

By funneling oil into storage, the United States would take at least 100,000 barrels out of the global market, while providing additional insurance against future supply disruptions.

With worldwide demand at 76 million barrels a day, the impact of the U.S. action is likely to be modest, said energy analyst Adam Sieminski of Deutsche Banc Alex. Brown. ``But anything that takes oil off the market and puts it into storage adds to demand and is going to have some effect on price.

``It's the U.S. contribution to stabilizing prices,'' Sieminski said, adding that OPEC oil producers, who are worried about an oil glut, are likely to welcome the move.

The proposal being considered at the White House would be aimed at bringing the reserve close to its current 700 million-barrel capacity in 2003 or shortly thereafter, said the sources.

Congress created the Strategic Petroleum Reserve in 1975 as a response to the 1973 Arab oil embargo. The U.S. reserve of 543 million barrels is enough to make up for the loss of 54 days of imports.
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