Senate rejects Bush policy of boosting oil reserve

WASHINGTON (Reuters) - The U.S. Senate voted overwhelmingly on Tuesday to stop adding oil to the Strategic Petroleum Reserve until crude prices fall below $75 a barrel, repudiating the Bush administration's policy of boosting the stockpile at a time of record fuel costs.

The Senate voted 97 to 1 to suspend oil deliveries to the emergency oil reserve, after most Republicans abandoned the president on the issue. The plan was tacked on to a flood insurance reform bill that passed 92 to 6, enough to override a presidential veto.

"Instead of hiding barrels of oil in the nearly full Strategic Petroleum Reserve, we want to put them on the market to increase supply and lower prices," said Senate Majority Leader Harry Reid.

"When the American consumer is being burned at the stake by high gas prices this government ought not be carrying the wood. It's just that simple," said Democrat Byron Dorgan, the main sponsor of the proposal.

The House of Representatives was expected to approve a similar measure later on Tuesday. Supporters say the plan will boost oil supplies in the market and help lower energy prices.

Americans have bombarded their lawmakers with complaints about gasoline costs, which hit a record $3.72 a gallon at the pump this week. Lawmakers hope diverting the reserve's oil shipments to the market will provide consumers some relief.

Rep. John Dingell, Democratic chairman of the House Energy and Commerce Committee, said stopping deliveries to the reserve might "prick the speculative bubble" in energy prices.

The Bush administration opposes the move, saying suspending oil shipments would do little to cut oil prices which reached a record near $127 a barrel on Tuesday.

White House spokesman Scott Stanzel said the president's advisors have not recommended a veto of the bill at this time. "We'll watch how this progresses through Congress," he said.

The administration says the country should increase the current emergency oil reserve of 703 million barrels, held at four underground storage sites in Texas and Louisiana to offset any major supply disruptions.

The amount of oil added to the reserve in the first half of this year will average about 70,000 barrels a day. Shipments will be highest in May, totaling 3.8 million barrels -- or almost 123,000 barrels a day.

The Energy Department on Tuesday received bids from oil companies to add millions of barrels of additional crude to the reserve during the second half of this year.

"As we work to increase our nation's energy security, we should be taking steps to strengthen our energy insurance policy, not weaken it," Energy Department spokeswoman Megan Barnett said.

Democratic presidential candidates Hillary Clinton and Barack Obama voted to halt future oil deliveries. Republican presidential candidate John McCain was campaigning and missed the vote.

Separately, the Senate rejected a broader Republican energy measure which would have allowed oil drilling in the Arctic National Wildlife Refuge and in the waters off coastal states where energy exploration is now banned.

(Reporting by Tom Doggett; Editing by David Gregorio)