Yesterday the U.S. Department of Energy’s (DOE) Office of Fossil Energy awarded contracts for the first of several sales of crude oil from the Strategic Petroleum Reserve (SPR). A Continuing Resolution enacted in December 2016 included a provision for DOE to sell up to $375.4 million in crude oil from the SPR. This sale will be the first of several planned sales totaling nearly 190 million barrels during fiscal years 2017 through 2025.
As the largest stockpile of government-owned emergency crude oil in the world, the SPR was established to help alleviate significant oil supply reductions from occurrences such as major geopolitical events, severe weather, unplanned production curtailments, transport disruptions, and delivery outages. Located in four storage sites along the Gulf of Mexico, the SPR held more than 695 million barrels of crude oil as of January 13, or about 97% of its design capacity (713.5 million barrels).
Source: U.S. Energy Information Administration, based on Strategic Petroleum Reserve
Note: Volumes sold under the Bipartisan Budget Act of 2015 Section 404 are estimates based on an assumption of $50 per barrel.
Several recent acts of Congress have authorized sales from the SPR:
One of the SPR’s core missions is to carry out U.S. obligations under the International Energy Program (IEP), the 1974 treaty that established the International Energy Agency (IEA). Under the IEP, the United States must be able to contribute to an IEA collective action based on its share of IEA oil consumption. Based on the most recent shares, the United States must be prepared to contribute about 44% of the barrels released in an IEA-coordinated response. The United States government relies on using oil in the SPR to meet this requirement. Previously, in response to oil supply disruptions driven by hostilities in Libya in 2011, the United States contributed as much as 50% of the total IEA collective action.
As a member of the IEA, the United States is obligated to maintain stocks of crude oil and petroleum products, both public and private, to provide at least 90 days of net import coverage. Based on October 2016 levels of net crude oil and petroleum product imports, the SPR alone holds crude oil stocks equivalent to 145 days of import coverage. Private (commercial) stocks of crude oil provide another 489 million barrels, equivalent to another 102 days of import coverage.
Source: U.S. Energy Information Administration, Petroleum Supply Monthly
Note: Days of import coverage reflects Strategic Petroleum Reserve level divided by net imports of crude oil and petroleum products.
Source: EIAPrevious Next
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