Not time to tap U.S. oil reserve--Treasury's Snow

Fri Aug 20, 2004

WASHINGTON, Aug 20 (Reuters) - U.S. Treasury Secretary John Snow said on Friday there had not yet been a large enough disruption to the supply of oil to warrant tapping U.S. emergency stockpiles.

"The president has made it clear that the Strategic Petroleum Reserve is to be used for the purposes for which it was intended, a disruption of such proportions that it's called for. I don't think we're there yet," Snow said in an interview with the financial cable news channel CNBC.

Snow spoke as U.S. crude prices (CLc1: Quote, Profile, Research) traded near a fresh record high of $49.29 a barrel hit earlier in overnight trade.

Asked whether the administration should at least stop taking oil out of the market to fill the emergency oil reserve, Snow said such a move would have little impact on markets.

"We're filling it at a rate of 100,000 barrels per day in a market that's over 80 billion barrels a day," the U.S. Treasury chief said. "I don't think that would have much effect." A spokesman later clarified that Snow had meant a market of 80 million barrels a day.

Democratic presidential hopeful Sen. John Kerry has called for a temporary suspension of official U.S. oil stockpiling while gasoline and crude prices are high.

Snow said, as he has in other recent public statements, that the recent run-up in oil prices reflected concerns over potential supply disruptions and that current prices did not appear to be supported by the fundamentals of the market.

"I think there is considerable excess in the current price over where the fundamentals will take you," he said. "I don't know whether that's $10 or $8 or $6."

"The energy experts that I've talked to all indicate that current prices are abnormally high, something of a bubble, and they ought to recede as the uncertainties get clarified," Snow said.

Snow said the level of oil prices "underscores the need for a stable world and underscores the need to win the war on terror."

He said the U.S. economy was fundamentally strong but was laboring against high energy costs, with businesses reticent to expand and hire because of "the uncertainty of these energy prices and terrorist threats and instability in sensitive parts of the world."

"We understand now that the war on terror is also a war to preserve economic strength at home," he said.

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