Biden authorizes release of more than 180M barrels of oil from Strategic Petroleum Reserve; 1M bpd for 6 months
In an effort to address the rapidly increasing cost of gasoline, President Biden authorized the release of 1 million barrels of oil per day for the next six months—more than 180 million barrels—from the Strategic Petroleum Reserve (SPR). The Biden Administration had earlier in March authorized a drawdown of 30 million barrels in coordination with the IEA in response to Russia’s invasion of Ukraine.
The SPR is a US Government complex of four sites with deep underground storage caverns created in salt domes along the Texas and Louisiana Gulf Coasts. The newly authorized drawdown will come from all four storage sites. Current authorized storage capacity is 714 million barrels, however the SPR currently holds 568.3 million barrels—its lowest since May 2002—according to the US Energy Information Administration (EIA).
The US and other member states of the International Energy Agency (IA) agreed earlier in March to release 60 million barrels of oil reserves to compensate for supply disruptions following Russia’s invasion of Ukraine, with the US supplying 30 million.
Biden called the latest release a “wartime bridge” to increase oil supply until domestic production ramps up later this year. The release is by far the largest yet from the national reserves.
Biden said that his administration would restock the reserve when prices are lower.
Background. The SPR was established in the 1970s to alleviate the effects of unexpected oil supply reductions. The primary rationale for the SPR is for it to serve as an emergency response tool the President can use should the United States be confronted with an economically-threatening disruption in oil supplies.
SPR releases of crude oil can occur under four conditions: emergency drawdowns, test sales, exchange agreements, and nonemergency sales.
There have been four prior emergency drawdowns in the history of the SPR:
1991 Operation Desert Storm Sale. President George H. W. Bush authorized a drawdown of 33.75 million barrels over a 45-day period to calm the global oil market in the immediate aftermath of the beginning of the Iraq war. (The total volume sold during the Desert Storm drawdown was just over half the amount offered by the Government, primarily because industry offers for the higher-sulfur “sour” crude oil were substantially lower than bids for the lower-sulfur “sweet” crude.)
2005 Hurricane Katrina Sale. In August 2005, Hurricane Katrina caused massive damage to oil production facilities, terminals, pipelines, and refineries in the Gulf of Mexico. President George W. Bush authorized a drawdown of 30 million barrels (15 million barrels each of sweet and sour). Awards were made for delivery of 10.8 million barrels of sweet and 200,000 barrels of sour crude oil.
2011 IEA Coordinated Release. In June 23, 2011, Energy Secretary Chu announced that the US and its partners in the International Energy Agency (IEA) would release a total of 60 million barrels of oil onto the world market in response to the ongoing loss of crude oil due to supply disruptions in Libya (Libyan civil) and other countries (Arab Spring) and their impact on the global economic recovery. DOE received over 90 offers that resulted in 28 contracts with 15 companies for deliveries of 30,640,000 barrels.
1 March 2022 IEA Coordinated Release. On 1 March 2022, the US Department of Energy committed to releasing 30 million barrels of crude oil from the SPR to ensure an adequate supply of petroleum in response to Russia’s further invasion of Ukraine. This SPR release was part of a coordinated effort among the 31 members of the International Energy Agency (IEA).
Test sales are relatively rare: the most recent test sale occurred in 2014. The SPR has released crude oil under exchange agreements 13 times since 1996, most recently after Hurricane Ida in September 2021. In these exchange agreements, crude oil is released to private companies and repaid in kind with additional barrels by specified dates, similar to monetary interest on a loan.