Responding to congressional pressure, the Bush administration on Friday said it is suspending oil deliveries into the government's Strategic Petroleum Reserve for the remainder of the year.
The move came days after Congress passed legislation requiring President Bush to temporarily halt shipments into the reserve in hopes of lowering gasoline prices. The president is expected to sign the bill.
The decision came as Bush, visiting Saudi Arabia, sought to get the Saudis to pump more oil. Saudi Arabia announced it decided a week ago that it increase production by 300,000 barrels a day in response to customer requests, although it also told U.S. officials it believes world supplies are sufficient to meet demand.
The Energy Department said it will not sign six-month contracts schedule to have begun starting July 1, for the acceptance of 76,000 barrels of oil a day. The department also plans to defer deliveries under existing contracts once the legislation passed by Congress late Wednesday becomes law.
Bush had opposed halting the shipments, arguing that such a relatively small amount of oil would not influence prices. The reserve, a system of salt caverns on the Louisiana and Texas Gulf coast, is 97 percent full, holding 701 million barrels of crude.
The stockpile, currently sufficient to cover two months of oil imports, is kept as a cushion in case of a major disruption of oil supplies.
It's not clear how much of an impact — if any — the interruption of deliveries into the reserve will have on oil or gasoline prices.
Crude oil prices were about $126 a barrel and held firm Friday on the New York Mercantile Exchange, despite the U.S. and Saudi announcements. Average gasoline costs were nearly $3.79 a gallon, according to AAA and the Oil Price Information Service.
Both the House and Senate by lopsided votes this week directed the president to suspend the oil SPR shipments with both Republicans and Democrats saying it made no sense for the government to take oil at today's prices. The crude oil would better be left on the market to increase commercial supplies, they said.
The government accepts the oil in lieu of royalty payments that otherwise would go into the U.S. Treasury on oil taken from U.S. land and offshore waters. Administration officials emphasized they are not actually "buying" oil, but critics say the U.S. Treasury in any case is losing revenue.