New York (Platts)--24Jul2008

The Bush administration Thursday threatened to veto a bill by House
Democrats that would draw down crude oil from the US Strategic Petroleum
Reserve, swapping out the light, sweet crudes currently stored there for
heavier, sour crudes that would replace them.

The White House, in a statement, said it "strongly opposes" the Strategic
Petroleum Reserve Drawdown and Swap bill offered by Democrats. "If this bill
were presented to the President in its present form, the President's senior
advisors would recommend that he veto it," said the statement.

The White House said that the immediate drawdown of the SPR required
by the legislation "would have a number of adverse effects and would fail to
have a lasting effect on oil prices." Among its negatives, according to the
White House, is that the bill would "jeopardize national security by
increasing our vulnerability to an oil supply disruption."

Instead, the Bush administration said that Congress should "pass
legislation to increase domestic oil supply."

The White House also noted that the SPR was created by Congress to
protect the US in the event of a "severe energy supply interruption" such as a
major oil embargo, a natural disaster, or a terrorist attack, and not to
reverse price increases in the market.

The House Thursday was debating the bill, and a vote was expected later
in the day.

Senate Democrats, meanwhile, Thursday offered a similar SPR drawdown
proposal as part of the energy speculation bill. An impasse between Democrats
and Republicans has been reached on the bill.

Nevertheless, the Senate Democrats said their amendment to the bill
"directs the Secretary of Energy to sell 70 million barrels of high-quality
light crude oil now held in the SPR within six months of enactment." The
amendment would also direct the Energy Department to swap out light, sweet
crude for heavier crude oil, adding that, "replacement barrels cannot be
purchased until at least one year after enactment."