Bush rejects Big Oil pleas to dip into reserves as Gulf crisis looms

At least five US-based oil companies hoping to dip into the American Strategic Petroleum Reserve (SPR) have had their emergency bids rejected by the Bush administration.

Commodities traders and analysts believe that the hard-line position could cause crude prices to spike above $35 per barrel over the next fortnight.

The current crisis in Venezuela should have triggered a draw on the SPR, but analysts believe Washington is holding back because of the impending conflict with Iraq. The SPR was established after the oil crises of the mid-Seventies and is stored in vast salt caverns on the US coast of the Gulf of Mexico.

The requests have come from companies whose businesses have been smashed by the oil workers' strike in Venezuela. Mainly through US companies, Venezuela moves 2.4 million barrels of crude a day under normal conditions, but last week union chiefs in Caracas estimated that output was down to just 170,000 barrels a day.

Citgo, the US-based refining arm of Venezuela's largest oil company, has openly asked to borrow crude from the reserves, while others have been more secretive. Those others are thought to include ChevronTexaco, Conoco- Philips and various firms that run joint ventures with Venezuelan oil companies.

The oil companies are not alone. Billy Tauzin, the chairman of the US House Energy and Commerce Committee, has launched an effort to persuade Spencer Abraham, the US Energy Secretary, to allow tapping of the reserves.

Mr Tauzin, along with the five oil companies, believes that the Venezuelan crisis should already have triggered an opening of the reserves. The President can allow a draw on the SPR if there is a severe disruption of imported products or a price spike. Last week Brent Crude soared to a two-year high of $31.98/barrel.

Despite the sense of emergency in the oil sector, the Bush administration is expected to continue refusing SPR requests. US domestic production is sitting at a 50-year low and the prospect of disrupted supplies from the Middle East is daunting, despite the strength of companies like ExxonMobil.

Although the SPR is usually kept two-thirds full, Washington has been working with oil majors to fill the SPR to its 700 million barrel capacity.