Washington (Platts)--4Jun2007

US Senator Ron Wyden, Democrat-Oregon, Monday blasted the Bush
administration for moving forward with its plan to take royalty-in-kind crude
oil off the market to fill the SPR, saying the move could further raise
record-high gasoline prices.

     "Unless the Administration has figured out how to repeal the laws of
supply and demand, it is economic malpractice to remove 27 million barrels of
crude oil from the market when consumers are now buckling under the weight of
record high energy retail prices for gasoline," Wyden wrote in letter to
President George W. Bush Monday. "I ask that these purchases be halted to
prevent further pressure on oil and gasoline prices when Americans already are
suffering from energy costs rising at a far greater rate than their
paychecks."

     The Department of Energy last week said it would begin transporting 9.2
million barrels of RIK crude oil to fill the SPR. This initial delivery, which
is slated to begin July 1, would be the first installment of a 27 million
barrel transfer to the SPR. 

    DOE last month decided to delay until at least autumn a direct purchase
program for the SPR, noting that it could not get acceptable offers and that
direct purchases of crude oil to fill the SPR could tighten the market and add
to crude oil and products prices during the high-demand summer driving season.
While halting the direct-purchase plan, DOE decided to move forward with the
RIK fills.

     DOE wants to replace the 11 million barrels it sold from the SPR in the
aftermath of 2005's powerful hurricanes Katrina and Rita.

     Wyden said he believes both programs should have been canceled. "If the
timing of this decision was not questionable enough based on the crude oil and
gasoline markets, the US has now entered [an Atlantic] hurricane season" that
government weather forecasters are expecting to be particularly active. 

    Wyden also noted that the US Treasury will lose more than $1.6 billion in
lost royalty revenue by diverting the RIK crude to the 690 million barrel SPR,
at current prices. "...[T]his expenditure is indefensible in light of current
budget shortfalls," Wyden wrote.

      The SPR, created in the aftermath of the 1973 Arab oil embargo, has a
capacity of 727 million barrels. The RIK program, jointly administered by DOE
and the US Minerals Management Service, allows some producers to pay the
royalties they owe for producing on federal lands with oil rather than cash
payments.

		--Cathy Landry, cathy_landry@platts.com