US Worries Over High Oil Prices, Ready for Y2K

Updated 5:11 PM ET December 9, 1999

By Tom Doggett

WASHINGTON (Reuters) - The Clinton administration said Thursday that oil prices have soared to "dangerously high" levels, and crude oil could be sold from the nation's emergency stockpile if already-tight supplies are disrupted by Y2K computer problems at the end of the year.

Energy Secretary Bill Richardson sent to the White House on Thursday contingency plans for selling oil from the Strategic Petroleum Reserve if necessary.

"The president, if he deems it necessary, can sign these findings at the appropriate time and put our plans into action," Richardson said at energy conference.

"This is not to suggest that there is a problem, only that we are prepared," Richardson added.

He gave no details about what level of disruption would trigger the sale of stockpiled oil.

The reserve, created after the 1970s Arab oil embargo, holds about 572 million barrels of oil in underground caverns.

While the millennium computer bug problem is a major concern, Richardson also made it clear that the administration was closely monitoring current oil prices with an eye toward possible action if necessary. He said $27 a barrel, slightly above current prices, was "a bit high."

"Prices have been drifting into what I see as dangerously high levels," he told reporters. "I want to see what will happen in the next few weeks to determine what other action we might take. We have options."

However, he refused to say whether selling oil from the reserve is an option that would be considered, even though such a sale would certainly push oil prices lower.

Sustained high oil prices could slow the robust U.S. economy, according to some economists.

"Our objective is to keep the American economy strong and I don't want inordinately high oil prices to adversely affect this administration's economic policy," Richardson said.

Richardson met separately on Thursday with the oil ministers of Saudi Arabia and Kuwait.

Saudi Arabia, which helped design the OPEC production cuts that have more than doubled world oil prices during the past year, is the world's biggest oil producer. The Saudis have already promised to help replace any world oil supplies that dry up because of Y2K problems.

The so-called Y2K problem refers to a computer's inability to recognize the year 2000, which could cause computers to crash that help control oil tankers, pipelines, refineries and other industry operations.

Saudi oil minister Ali al-Naimi told reporters after meeting with Richardson that he believed the U.S. oil reserve would only be tapped for major supply emergencies and would not be used to ease oil prices.

Stable world oil markets are crucial, he said.

"We seek neither low prices nor high prices but instead stable, well-supplied oil markets," he said. "We're more concerned with gyrations in the market."

Following a separate meeting with Richardson, Kuwait oil minister Sheikh Saud Nasr al-Sabah said there was "strong support" among OPEC members to extend the cartel's output cuts past March, when the pact is scheduled to end. A decision will be made then based on the current price of oil, world inventories and demand, he said.

Richardson said he had already discussed with his counterparts from Mexico and Venezuela what actions could be taken if world oil supplies were abruptly curtailed at the end of the month because of malfunctioning computers.

"We are developing a communications plan to keep us in concert up to, during, and after the rollover in addition to each of our contingency plans in the event that there is an oil supply disruption somewhere," Richardson added, referring to plans by Mexico, Venezuela and Saudi Arabia.

The U.S. Energy Information Administration recently said that in case of an emergency, the oil from the nation's emergency could be moved into the world oil market as in as little as 15 days.

U.S. lawmakers from northeastern states -- where many homeowners depend on heating oil -- have pressed the administration to tap the oil reserve now to ease prices.

Oil prices have hovered above $26 a barrel in recent days amid reports that world oil supplies are being drained at a faster rate than expected. Prices also rose from Iraq's export halt as a bargaining chip with the United Nations over terms of sales allowed under its oil-for-food program.

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-- Ray (ray@totacc.com), December 09, 1999

Answers

Like, didn't they make this announcement a week or so ago? Uh, do they think we weren't listening, or that someone wasn't listening?

-- Mara (MaraWayne@aol.com), December 09, 1999.

"This is not to suggest that there is a problem, only that we are prepared," Richardson added.

OH FOR CRYING OUT LOUD IN A BUCKET !!!!!!!!! There is a problem. Just go ahead and dang well admit it.

On second thought. Wait until December 26th.

-- the Virginian (1@1.com), December 09, 1999.