OPEC Production Levels Insufficient; Gas and Heating Oil Prices to Rise U.S. Oil Stocks near 25-year low

Senator Renews Call On President To Release Strategic Petroleum Reserves to Increase Inventories, Stabilize Prices  U.S. crude oil inventories are 40 million barrels below their historic average and are approaching their lowest levels since 1976, Schumer reported adding that OPEC's announced production increase last week is far below what is necessary to replenish oil stocks and stabilize prices. Schumer also released a survey which showed that gasoline prices at Long Island stations have increased by an average of fiftyeight cents per gallon. The new gas price data coupled with reports of dwindling crude oil inventories mean gas prices could reach $2 per gallon in the coming months, Schumer predicted.

"Consumers will see little relief at the pump unless some oil from the Strategic Petroleum Reserve is released and oil inventories are replenished," said Schumer, referring to America's 570 million barrel emergency stock of government owned crude oil.

"Last week, OPEC inched production slightly higher, but the new levels fall well short of what the world needs to replenish dwindling inventories and stabilize prices," said Schumer.
"With July 4 just around the corner, the strain of these gas prices is starting to be felt by families who were planning vacations but are being forced to put them off or change plans. Come winter, families are going to find their wallets even lighter when they start paying their heating bills."

Between June 16, 1999 and June 23 of this year, Schumer's survey found that the average price of a gallon of regular unleaded selfservice gasoline at 40 Long Island gas stations increased from $1.20 to $1.78, a 48 percent increase. Schumer and other analysts have blamed this rise in prices on a series of production cutbacks by the Organization of Petroleum Exporting Countries (OPEC) that culminated in March, 1999 when membernations cut supply by 1.7 million barrels per day.

Since March 1, 1999, the price of a barrel of crude oil has nearly tripled from $12.23 to $34.65. As the price of oil increases, the costs are passed on to consumers in the form of higher gas and heating oil prices. Last Thursday, OPEC announced that it would increase oil production by 708,000 barrels per day which analysts believe is not enough to lower prices. Schumer said oil inventories remain dangerously low and need to be replenished before significant price decreases can occur.

"OPEC's announcement last week was disappointing because it amounted to little more than a drop in the bucket. At best this small increase in production could slow the rise in prices, but it certainly will not reduce gas prices this summer or heating oil prices next winter," Schumer said.

"The problem is not so much that OPEC is producing too little oil to meet current demand, but that a year's worth of tight OPEC supply quotas has left our oil and gas inventories dangerously low. With our oil inventory tank near empty we need at least another million barrel a day oil production increase to create breathing room and return prices to reasonable levels," Schumer continued.

U.S. crude inventories are 40 million barrels below the historic 25 year average and are approaching their lowest levels since 1976. With inventories this low, OPEC will continue to maintain control over the global oil market indefinitely, reaping billions in profits while keeping costs high for consumers and threatening the economy.

"A turn of the spigot one way will send oil prices above $40; the other way will bring relief. We are completely at the mercy of OPEC," said Schumer.

Schumer renewed his call on the Clinton Administration to replenish dwindling oil inventories by releasing a modest amount of oil from the SPR. He also called for an increase in the automobile fuel efficiency standard that governs the average miles per gallon the average automobile gets.

"The continued expansion of our economy may very well depend on whether we can reduce the price of oil to a more market oriented level. It is clear we need two tracks: one is to increase supply through the reserve and other is to decrease demand with greater fuel efficiency."

"If we released a million barrels a day for the next six weeks, we would replenish our crude inventory to a level deep enough to bring prices back to normal and still have more than 90% of the strategic petroleum reserve in storage," said Schumer.

Schumer said that one fuel economy step is to reclassify SUVs and Jeeps as cars instead of trucks since cars must adhere to stricter miles per gallon requirements. "Let's face it, SUVs are not trucks and should not be classified that way just to avoid a fuel standard," said Schumer.

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