Mike Levin: “Part of this strategy--allowing deliveries to be deferred when prices were high and supplies tight--was spelled out in…”

“Part of this strategy--allowing deliveries to be deferred when prices were high and supplies tight--was spelled out in the ``Business Procedures'' for the SPR program issued by DOE in January 2002. The Business Procedures spell out how scheduled deliveries of oil to the SPR can be deferred. Generally, companies will ask for a deferral when the market is tight so they can meet their supply commitments to refiners who have an immediate need for the oil. DOE's procedures provided that a company could be granted a deferral in return for additional barrels of oil to be delivered at the later date. DOE calculated the amount of additional oil that would be delivered by comparing the market prices at the time of delivery was originally scheduled and at the time of the deferred delivery. DOE's own documents state that deferrals of oil scheduled to be delivered in 2001 provided an additional 3 rac{1}{2} million barrels of oil for the SPR at no additional cost to the Government. Deferrals of deliveries scheduled for 1999 and 2000 had added another 3 rac{1}{2} million barrels. At an average cost of $25 per barrel, these deferrals added a total of 7 million barrels of oil to the Reserve, worth about $175 million, for no cost to the taxpayer. The SPR program projected: The potential for savings to the Treasury if we continue to follow this business model until the Reserve is full is additional hundreds of millions of dollars.…”