It seems like everyone has an opinion about the Strategic Petroleum Reserve (SPR), and everyone is at least a little bit right. For example, many assert the SPR provides a helpful crude oil supply buffer in the event of a major disruption from, say, a strong hurricane in the Gulf of Mexico or a war in the Middle East. Others say the market can take care of itself — the SPR just muddies the waters by getting government (and worse yet, politicians!) involved. Still others say the oil market has changed dramatically since the SPR was established almost a half-century ago and that the strategy behind the reserve should be revised in response to those changes. In today’s RBN blog, we discuss the very gradual refilling of the SPR after a big draining — and an ongoing debate about the reserve’s future.
The U.S. SPR, established in the mid-1970s in response to the 1973-74 oil crisis, is the largest emergency stockpile of crude oil in the world, with an authorized capacity of 714 MMbbl. In the past few decades, it has been used to store crude for a rainy day — that is, to help deal with unpredictable events such as embargoes or major hurricanes that interrupt supply.
During the Trump administration, the crude oil volumes stored within the SPR’s four storage sites (more on those in a moment) fell by 57 MMbbl (from 695 MMbbl to 638 MMbbl), mostly due to congressionally mandated drawdowns designed to help offset federal spending. Since taking office in January 2021, President Biden has tapped the SPR a number of times, mostly to help address a supply/demand balance that tightened rapidly as demand rebounded from COVID lows, resulting in higher oil, gasoline and diesel prices. For example, in November 2021, the Biden administration authorized a 32-MMbbl exchange in which barrels would be released by the end of April 2022 but would need to be returned to the SPR during fiscal 2022-24. Then, in February 2022, the administration authorized a 30-MMbbl withdrawal shortly after Russia’s invasion of Ukraine. (The 30 MMbbl was one half of an international, 60-MMbbl sale orchestrated by the International Energy Agency, or IEA.) One month later, the president announced plans for the largest SPR withdrawal ever: the release of 1 MMb/d over 180 days.
Figure 1. SPR Volumes During the Biden Administration. Source: EIA
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