Bush wants to double U.S. emergency oil stockpile -

WASHINGTON (Reuters) - The United States will begin buying oil this spring as part of a plan by the Bush Administration to expand emergency reserves and shore up energy security, the White House said on Tuesday.
President Bush' name=c1> SEARCHNews News Photos Images Web' name=c3> President Bush will call for doubling the Strategic Petroleum Reserve from 727 million barrels to 1.5 billion barrels in his State of the Union speech late Tuesday.
"Expanding the Strategic Petroleum Reserve is a wise and a prudent policy decision that would provide an additional layer of protection for our nation's energy security," U.S. Energy Secretary Sam Bodman said in a telephone call to reporters.
The effort is part of a growing focus on "energy security" by both the Bush administration and Congress aimed at increasing home-grown fuel sources, like ethanol, in order to reduce U.S. dependency on oil imports.
The reserve, created by Congress in the mid-1970s in response to the Arab oil embargo, currently holds about 691 million barrels of crude at four underground storage sites in Louisiana and Texas. Legislation passed in 2005 called for building storage to 1 billion barrels.
SPRING FILL UP
Bodman said the government will begin by purchasing about 11 million barrels of replacement crude this spring, adding oil at a rate of around 100,000 barrels a day.
The crude should be in the reserve by the end of the summer, a
Department of Energy' name=c1> SEARCHNews News Photos Images Web' name=c3> Department of Energy spokesman said.
The government will fund the purchase with $600 million raised when it sold 11 million barrels of reserve oil to U.S. refiners in 2005 after Hurricane Katrina hit the Gulf Coast.
Beyond 2008, the department will fill the reserve based on market conditions with the aim of not impacting crude oil or gasoline prices, Bodman said. But analysts said an increase in price may be unavoidable.
"The government can spin it any way they like, but the history, from the 1970's on, is very clear: During periods when the reserve is being increased, prices tend to rise," said Tim Evans, an analyst with Citigroup Global Markets.
U.S. oil prices surged on Tuesday after the department's announcement, settling settled up $2.46 -- nearly 5 percent -- to $55.04 a barrel.
"The magnitude, going from 727 (million) to 1.5 billion barrels would be very hard to do given the tightness of the supply-demand situation. And prices are already up dramatically from where they were years ago," said Benjamin Halliburton, Managing Director at Tradition Capital Management in Summit, New Jersey. "It doesn't make a lot of sense to me."
If oil prices continue to rise, it could put the brakes on a drop in gasoline prices U.S. drivers have enjoyed at the pump in recent weeks.