Durbin Proposes Strategic Gas and Fuel Reserve

DURBIN PROPOSES STRATEGIC GAS AND FUEL RESERVE

With one-quarter of this country's refinery capacity off-line due to hurricanes Katrina and Rita, U.S. Senator Dick Durbin (D-IL) has proposed a plan to create a fuel reserve that would provide consumer with a price buffer when pipelines or refinery outages occur due to national catastrophes. Durbin legislation, the Strategic Gasoline and Fuel Reserve Act of 2005, would require the Department of Energy to hold and manage 40 million barrels of unleaded gasoline and 7.5 million barrels of jet fuel to be used in times of shortages that adversely impact the U.S. economy. U.S. Senator Barack Obama has co-sponsored the bill.

"What hurricanes Katrina and Rita taught is that we must be ready for the unexpected. We must be prepared to absorb the impact that another natural disaster, refinery fire, or pipeline explosion would have on the fuel supply and as a result on our economy. It is critical to our national and economic interests to build a gasoline reserve to keep the country moving forward in case of an emergency," Durbin said.

Today, the United States is ill-prepared to provide immediate relief to consumers when drastic fuel shortages occur. While European countries began creating emergency stockpiles of gasoline decades ago, the U.S. hasn't done so. Instead, we must rely on imports of refined product to reduce supply shortages.

The Bush Administration has ordered the release of crude oil from the Strategic Petroleum Reserve (which was created in the 1970s following an Arab oil embargo), but without refinery capacity, putting crude oil on the market does little to provide gasoline to consumers and alleviate high prices at pump. There is ten-day lag time between production and delivery of refined gasoline. A Strategic Gasoline and Fuel Reserve would provide the much needed refined product that would immediately alleviate supply constraints and high prices at the pump.

The Washington Post last week reported that refineries have recognized a 255% increase in the amount of profit they pull in from the sale of one gallon of gasoline. Last year, refiners received only 27 cents per gallon - this year, they are pulling in nearly one dollar for every gallon of gasoline that Illinois consumers buy.

The gasoline and jet fuel reserve could save both consumers and the airlines billions of dollars by alleviating price spikes caused by unexpected fuel shortages.

Mark Anderson, Vice President, Government Affairs, United Airlines, said, "Senator Durbin understands that escalating fuel prices, driven in part by shortages in supply, have a negative impact on travel and economic stability for individuals and businesses throughout Illinois and the nation. This proposal, which will ensure that emergency supplies of refined products like gasoline and jet fuel are located at strategic locations across the country, will provide economic stability when it is most needed. We applaud Senator Durbin's efforts to address this issue of critical importance."

According to Will Ris, Senior Vice President for Government Affairs for American Airlines, "the proposal of Senator Durbin to establish a reserve of refined oil products is a far-sighted idea that should be implemented quickly. The hidden story of the current crisis is that the cost of refining crude oil has increased at a much more rapid rate than the price of crude itself. By creating a reserve of refined products, the fluctuation in the markets due to temporary refining shortages can be reduced substantially. We particularly applaud Senator Durbin's proposal to build reserves of jet fuel as well as gasoline. This shows a strong understanding of the importance of commercial aviation to the economy."

http://durbin.senate.gov/record.cfm?id=246867&&