WASHINGTON: The US is sitting on about 691 million barrels of oil in its Strategic Petroleum Reserve (SPR), and with oil prices close to a five-year low set in January, the US is looking to buy even more, soliciting bids for 5 million barrels of oil, worth about $224 million at the closing price on Friday, March 13, of $44.84 on NYMEX.
The Department of Energy said it plans to buy sweet crude for delivery for its Freeport, Texas, site between June 1 and July 31 and perhaps as early as May, according to a federal website.
The first time the U.S. made a 911 call to the SPR was in January 1991 at the start of Operation Desert Storm. The second time came in 2005 after Hurricane Katrina damaged much of the Gulf Coast’s oil refining and production capacity. The most recent event came in 2011 with the U.S.-led attack on Libya. The reserve, which was initiated by President Jimmy Carter in August 1980, is designed to protect the U.S. against a total loss of imported oil, particularly by the Organization of the Petroleum Exporting Countries, or OPEC. Two months after the Sept. 11, 2001 attacks, President George W. Bush ordered the Strategic Petroleum Reserve filled to near capacity of 700 million barrels. At the time of the order, the SPR contained about 545 million barrels.
The reserve was filled by August 2005. The reserve as of March 6, 2015, held about 691 million barrels of oil, according to the Department of Energy’s website, which is near its full capacity of 727 million barrels. Of the reserve, 262 million barrels are lower-sulfur “sweet” crude, which is easily refined into gasoline, and 430 million barrels are of higher-sulfur “sour” crude, which is more difficult to refine.
A single 42-gallon barrel of oil is typically refined into about 20 gallons of gasoline, 11 gallons of diesel and 4 gallons of jet fuel along with other refined products.
At its peak in 1970, the U.S. produced more than 9.6 million barrels a day, and according to the Energy Information Administration, the U.S. is getting close to that record, with 9.3 million barrels a day produced in December 2014.
Even if all imported oil were cut off, including the unlikely event that allies like Canada and Mexico, which supply the U.S. with about 4 million barrels of oil a day, couldn’t, or wouldn’t supply oil to the U.S., the SPR gives the U.S. a cushion of more than 90 days’ worth of supply to keep the U.S. economy running until supplies can be restored. Back in 2005, Congress had planned to expand the reserve to 1 billion barrels but changed its mind in 2011.
The good news is that in the history of the reserve, the U.S. has never had to draw on more than a fraction of the its total capacity. The biggest release came in 2011 with 30 million barrels, in coordination with the IEA and its members, which include Japan, Germany and Italy, who released just under another 30 million barrels when the U.S., Britain and France launched air strikes against Libyan leader Moammar Gadhafi.
From the moment a U.S. President orders a release from the SPR, the reserve can draw down its capacity at a rate of 4.4 million barrels a day for three straight months, which coincidently (or not) is just over the exact same amount of oil a day the U.S. imports from OPEC countries (3.5 million) and more than twice what the U.S. imports per day from Persian Gulf states (2 million barrels a day).
The location of the reserves is key, with two facilities in Texas and two in Louisiana, as they are interconnected with industry refineries and tanker platforms that can receive the oil straightaway. Still, it would take 13 days from a decision by the president to enter the U.S. market. All told, the U.S. imports about 7.7 million barrels of oil a day from more than 80 countries, but also ships out a record 4.9 million barrels a day in exports, mainly in refined products.
