United States Strategic Petroleum Reserves
March 3, 2022
In the aftermath of the Arab oil embargo of 1973-74, the United States government, in coordination with the International Energy Agency (IEA), established a domestic Strategic Petroleum Reserve (SPR). Each of the 31 IEA member countries has an obligation to hold emergency oil reserves of at least 90 days of net oil imports based on the average daily net imports of the previous calendar year. Based on how net imports are calculated (both primary and associated hydrocarbon products), the United States was likely a net exporter of “petroleum” for the full year 2021.
Technological advances in hydraulic fracking have allowed the United States to become a net exporter of hydrocarbons over the last several years. Thus, the SPR is deemed far less critical today than when the United States was a large importer of hydrocarbons. Since 2015, the SPR has been viewed as something of a revenue generator by politicians, with the majority of SPR sales proceeds going to the United States Treasury.
The United States’ SPR (crude oil) is stored in massive salt caverns along the Gulf Coast, two in Texas and two in Louisiana. There are sufficient pipelines to transport approximately 4.4 million barrels a day from the caverns to nearby refineries. At present, our SPR stands at 580 million barrels, or at 81% of its maximum capacity of 714 million barrels. Based on The Infrastructure Investment and Jobs Act passed in November of 2021, previous planned releases, and the Biden administration’s decision to release SPR reserves to blunt the current rise in gasoline prices (50 million barrels in November 2021 and 30 million in February 2022), total SPR inventories are scheduled to decline to 285 million barrels by the year 2031, though this number can obviously change based on future sales or purchases.
The SPR was at 706.5 million barrels in 2015. In an increasingly unstable world, is it wise to continue to draw down our strategic reserves to temporarily hold down gas prices? In the context of global daily consumption (over 100 million barrels) releasing an additional 30 million barrels will likely have little or no impact on oil prices.
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