Posted by: SWL | March 15, 2011

U.S. Strategic Petroleum Reserve

The Strategic Petroleum Reserve (SPR) currently holds 726 million barrels of crude oil – 75 days worth of U.S. energy needs. Worried Congressional Democrats began lobbying the administration to tap SPR on February 24, only nine day after political unrest erupted in Libya.

On March 4, CNN reported that President Obama said he wouldn’t open the Reserve because there isn’t an emergency. But just a few days later the news was full of stories that releasing some oil is one option under consideration by the White House.

Tapping SPR now would be a mistake. Rising gasoline prices are hurting families and businesses, but are not an emergency. Let’s imagine that the government announces the release of two weeks worth (about 18%) of the oil. This news causes gas prices to stabilize. But it takes 13 days after a president’s decision for the crude to reach oil companies, which is the point where we would really see some relief at the pumps. If during that 2 weeks the situation in the Middle East has not stabilized the price of crude oil could jump since the rise and fall of price often reacts more to future conditions than present ones. If the administration then decides not to release any more oil, both crude and gasoline prices would likely soar to levels higher than we’ve seen so far.

If we use some of our petroleum reserves and new protests in Saudia Arabia shut down oil extraction, the U.S. won’t have enough left to adequately cope with the shortages. When President Bush authorized the sale of 11 million barrels of crude oil after Hurricane Katrina, storm damaged refineries and displaced workers had caused U.S. refining capacity to drop. We knew the situation was short-term. And it was much closer to the point of use than the Middle East shortages that are only a worry right now.

The rising gas prices are difficult, but we need to ride this out to maintain our security for possible future emergencies.

More information from DOE’s SPR FAQ web page:
* The average price paid for crude currently in SPR is $29.76/barrel.
* A maximum of 4.4 million barrels can be pumped out per day.