Biden Orders Release From Strategic Petroleum Reserve Amid Rising Energy Prices

What’s the story?

• President Joe Biden announced on Tuesday that he is ordering the release of 50 million barrels of oil from the Strategic Petroleum Reserve (SPR) amid rising energy prices. Biden said the action is being coordinated with China, India, Japan, South Korea, and the United Kingdom, and added:

“It will take time, but before long you should see the price of gas drop where you fill up your tank, and in the longer term, we will reduce our reliance on oil as we shift to clean energy.”

• The release will include 32 million barrels exchanged over several months that will eventually be restocked in the years ahead, and 18 million barrels come from an acceleration of a sale previously authorized by Congress into the next several months. The U.S. consumed a little more than 18 million barrels of oil per day on average in 2020, and the release of a roughly three-day supply of oil isn’t expected to have a significant impact on energy prices over time. 
• Energy prices have increased significantly over the past year. The latest inflation report released by the Bureau of Labor Statistics showed that from October 2020 to October 2021, gasoline prices increased 49.6% and utility gas service prices increased 28.1%. Fuel oil increased 59.1% in that timeframe, including a 12.3% increase from September to October in 2021. 
• This comes after Biden has taken a series of executive actions that stopped several projects that would increase oil and natural gas production in the U.S. and North America in the name of fighting climate change. Those actions include halting new leases for oil and natural gas development on federal lands (which is currently being challenged in federal courts), blocking production in the Arctic National Wildlife Refuge, revoking the permit for the Keystone XL pipeline, and repeatedly urging OPEC and its partner countries to increase oil production.
• Biden’s announcement has been met with bipartisan skepticism. Senate Energy and Natural Resources Committee Chairman Joe Manchin (D-WV) said the release “is an important policy Band-Aid for rising gas prices but does not solve for the self-inflicted wound that shortsighted energy policy is having on our nation.” Manchin called on Biden to reverse his decisions on domestic energy production and the Keystone XL pipeline:

“I continue to call on President Biden to responsibly increase energy production here at home and to reverse course to allow the Keystone XL pipeline to be built which would have provided our country with up to 900,000 barrels of oil per day from Canada, one of our closest allies. To be clear, this is about American energy independence and the fact that hard working Americans should not depend on foreign actors, like OPEC+, for our energy security and instead focus on the real challenges facing our country’s future.”

• Senate Energy and Natural Resources Committee Ranking Member John Barrasso (R-WY) also released a statement criticizing Biden’s energy policy: 

“We are experiencing higher prices because the administration and Democrats in Congress are waging a war on American energy. President Biden has either eliminated or severely restricted access to America’s oil and natural gas resources on federal lands and waters... Begging OPEC and Russia to increase production and now using the Strategic Petroleum Reserve are desperate attempts to address a Biden-caused disaster. They’re not substitutes for American energy production.”

What is the Strategic Petroleum Reserve?

• The Strategic Petroleum Reserve (SPR) is a supply of petroleum held by the Dept. of Energy (DOE) for emergency use. It was created in 1975 after the 1973-74 oil embargo by OPEC to mitigate the impact of future supply disruptions on U.S. energy markets by holding 1 billion barrels of oil in reserve. 
• The SPR’s maximum authorized storage capacity reached an all-time high of 750 million barrels in 1991, but that declined after a facility closure. The most oil held in the SPR was 726 million barrels in 2009. The Energy Policy Act of 2005 authorized expansion of the SPR to its original goal of 1 billion barrels of storage capacity, but that failed to materialize because of opposition to a proposed facility in Mississippi.
• The SPR currently has a congressionally authorized capacity of 713.5 million barrels of oil (actual physical capacity is 727 million barrels) at the four operational SPR facilities: Bayou Choctaw, Louisiana (76 million barrel capacity); Big Hill, Texas (170 million barrel capacity); Bryan Mound, Texas (247.1 million barrel capacity); and West Hackberry, Louisiana (220.4 million barrel capacity). 
• SPR facilities are located 2,000-4,000 feet below ground in naturally-occurring salt formations that offer cost, environmental, maintenance, and security advantages over surface storage tanks. Salt caverns are about one-fifth the storage cost of surface tanks, geologic pressures naturally seal cracks in the salt formations to prevent oil leaks, and the temperature differential keeps the oil circulating to keep its quality consistent. They can also be enlarged to fit precise dimensions through a mining process in which the salt is dissolved with fresh water.

— Eric Revell

(Photo Credit: Stock.com / onourdongel)