Filling the strategic oil tank
The sudden increase in the number of high US officials visiting Saudi Arabia this month may have important repercussions for the vital American strategic oil reserve. Whether Secretary of State Haig formally raised the reserve issue is unclear. But even if not, his discussion of US security interests in the Middle East may have helped make the case for the reserve more palatable in Saudi eyes, despite some underlying objections.
In many respects, the oil reserve is now at one of those crucial turning points that have characterized its troubled history since the 1973-74 Arab oil embargo. The Reagan administration, in just its few short months in office, has sharply boosted the daily stockpiling of oil in the reserve (located in deep salt caverns in Louisiana and Texas) from something on the order of 100,000 barrels a day back in January to around 202,000 barrels a day now. Reserve officials claim that they now have in the ground or under contract 166 million barrels of oil. Thus, the US is working toward meeting a projected target of 252 million barrels by September 1982.
Still, the US is far from reaching its goal of 750 million barrels. To get there by 1989 will cost an additional $41.7 billion, a top energy official told lawmakers this week. Finding the tax dollars necessary to finance the reserve in the current period of budget restraint may well prove as difficult as gaining access to the oil stocks themselves.
A nine-member Senate delegation will presumably address the latter issue when it visits Riyadh next week. Among points of discussion are expected to be two creative proposals reportedly put forward to Saudi officials in Washington by new Energy Secretary James Edwards. One is that the US buy large stocks of Saudi oil at current prices, with an assurance that when the oil is eventually withdrawn the US will reimburse the Saudis for all intervening price increases. The other is that the US buy the Saudi oil now, but pay for it later.
Meantime, the House meets on the issue this week. The administration is requesting a supplemental appropriation of $1.3 billion for the fiscal year 1981 budget and $3.8 billion for fiscal year 1982. The '81 requests so far are faring better than the larger 1982 figures. The reason: there is growing support both within Congress and in the executive branch for changing the funding method for the reserve and, instead of using federal budget outlays, switching to some form of off-budget expenditure -- such as selling oil-backed securities.
Reserve officials rightly complain that they need to know as soon as possible what type of financing method -- as well as what dollar figures -- will be assigned to the reserve so that they can conclude contracts. For that reason Congress and the Reagan administration should expedite funding plans even while the US vigorously presses its case with the Saudis. Ensuring that the US is never again militarily or strategically endangered by a cutoff of it s vital oil stocks must be an overriding national objective
