America’s 713.5 million barrel capacity Strategic Petroleum Reserve (SPR) only gets on the front page of the news when oil prices suddenly skyrocket or there is a threat to imports (which usually causes a sharp increase in prices). Few people know how much of the capacity is used now. For the time being, with oil at $45 a barrel, it does not matter. That is unlikely to change soon, but the SPR has been used three times, the most recently in 2011. In other words, the price of oil has surged unexpectedly on rare occasion.
The Office of Fossil Fuel describes the facility:
The Strategic Petroleum Reserve (SPR) is the world’s largest supply of emergency crude oil. The federally-owned oil stocks are stored in huge underground salt caverns along the coastline of the Gulf of Mexico.
Decisions to withdraw crude oil from the SPR are made by the President under the authorities of the Energy Policy and Conservation Act (EPCA). In the event of an energy emergency, SPR oil would be distributed by competitive sale. The SPR’s formidable size (design capacity of 713.5 million barrels) makes it a significant deterrent to oil import cutoffs and a key tool of foreign policy.
It is more than a huge hedge on oil prices.
The fluctuations of oil prices usually have been caused by the same sorts of conditions. Saudi Arabia, which has been a liberal supplier of crude recently, decides its political interests are more aligned with higher prices (or the needs of its treasury). That has happened before. Russian oil supplies are interrupted; Vladimir Putin can be fickle. The Venezuela economy continues its collapse and the chaos of its government, and much of its capacity is taken off line. Nigerian rebels largely shut down production there. Or, some combination of these together.
The price of oil rose to $152 a barrel in April of 2008 and to $119 in April 2011. In the scheme of things, that is not very long ago. Fortunately, 713.5 million barrels is a tremendous buffer.