How Full is the Strategic Oil Reserve Amid Global Energy Uncertainty

The Strategic Oil Reserve is a vital component in ensuring global energy stability, but how full is it, really? The reserve currently holds about 612 million barrels of oil.

The Strategic Petroleum Reserve (SPR) is operated by the US Department of Energy, and its purpose is to maintain a minimum of 500 million barrels of oil.

The SPR was established in 1975, in response to the 1973 oil embargo, and it has been a crucial tool in stabilizing the global energy market ever since.

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The Strategic Petroleum Reserve (SPR) is at its lowest level in decades, with over 200 million barrels of crude oil pulled out since last year, which is around 40% of what was stored.

This depletion is a concern because the SPR is the world's largest supply of emergency crude oil, located in underground caverns along the Texas and Louisiana coasts.

The reserve was created in response to the 1973 Yom Kippur War, when Arab nations blocked oil from flowing to the US, causing prices to soar.

Experts warn that if the conflict in the Middle East widens, gas prices could increase again, and the SPR might not be able to meet the demand.

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The US Oil Reserve is at a decade low, with a significant depletion of 200 million barrels of crude oil pulled out by President Joe Biden since last year. This is around 40% of what was stored.

The Strategic Petroleum Reserve, located in underground caverns along the Texas and Louisiana coasts, is the world's largest supply of emergency crude oil. It was created in response to the 1973 Yom Kippur War, when Arab nations blocked oil from flowing to the US.

High prices can impact elections and economies, and international events like Russia's invasion of Ukraine can also impact gas prices. The current conflict between Israel and Hamas has not yet impacted gas prices.

The reserve has been depleted under the current president, and experts warn that if the conflict widens to other countries in the Middle East that are major oil producers, gas prices could change.

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The Department of Energy is targeting medium sour barrels to refill the SPR, recognizing that US refineries are more likely to lose access to overseas medium sour crude oils than light sweet domestic crude in the event of a foreign supply disruption.

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A total of $12.5 billion from 2022 emergency sales was diverted from the SPR account to cover the resulting federal budget shortfall, leaving only $4.7 billion to refill the SPR.

The Department of Energy announced it would prefer to buy crude oil to refill the SPR at a range of $67 to $72 a barrel, which would allow for the acquisition of another 59 million to 63 million barrels without further congressional appropriations.

The US government has historically followed IEA guidelines calling for 90 days net import cover in the SPR, but net import cover may no longer be an adequate measure for strategic inventories.

At least 27 mb will be deposited into the SPR because of the SPR exchange authorized in late 2021.

To approach pre-2022 levels of gross oil import days cover, SPR stocks would need to rise to at least 550 mb, requiring several billion dollars in additional expenditures.

Gross imports include Canada and Mexico, two countries that pose comparatively low disruption risk and maintain robust economic ties with the US.

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The Department of Energy (DOE) initially stated that the objective was to replenish the Strategic Petroleum Reserve (SPR) by the end of 2024.

However, in subsequent months, the DOE made conflicting statements about replacing the oil that was removed. Energy Secretary Jennifer Granholm said in an interview with CNN that the plan was to replenish the SPR, but a DOE spokesperson later clarified that the aim was to recover the 180 million barrels of emergency sales, not refill the reserve back to pre-Biden levels.

The DOE spokesperson explicitly stated that there was no intent to refill the SPR, and canceling future sales would only ensure that barrels already taken out wouldn't create additional deficits. This means that while some oil would be bought and future sales canceled, the SPR would not be refilled to its original capacity.

The Department of Energy (DOE) initially stated that the objective was to replenish the Strategic Petroleum Reserve (SPR) by the end of 2024.

However, in July 2023, Energy Secretary Jennifer Granholm contradicted this statement, saying the plan is to refill the reserve through a mix of cancelled future sales and new purchases.

This was later clarified by a DOE spokesperson, who stated that the goal is not to completely refill the reserve back to pre-Biden levels, but rather to recover the 180 million barrels of emergency sales.

In other words, the DOE is not intending to put back the 180 million barrels that were removed, despite buying some oil and cancelling future sales.

In July 2024, Granholm made another statement that was widely misreported, claiming the SPR had been refilled to pre-2022 levels, which is not true.

The DOE's actions, including canceling sales mandated by Congress, do not add barrels back to the reserve, but rather ensure that barrels already taken out won't create additional deficits.

The Department of Energy is targeting medium sour barrels as it refills the SPR, recognizing that U.S. refineries are more likely to lose access to overseas medium sour crude oils than other types in case of a foreign supply disruption.

Funding for SPR refills comes from proceeds of previous emergency sales and congressional appropriations. The 180 mb sale in 2022 generated $17.2 billion for the SPR account.

Congress canceled several previously mandated SPR sales for 2024–27 to prevent further drawdown of the SPR, diverting $12.5 billion from the SPR account to cover a federal budget shortfall. This left $4.7 billion to refill the SPR.

$452 million was spent to acquire 6.2 mb in June 2023, leaving more funds available for future refills. The Department of Energy would prefer to buy crude oil to refill the SPR at a range of $67 to $72 a barrel.

At these price levels, another 59 million to 63 million barrels could be acquired without further congressional appropriations.

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Geopolitical risks that threaten global oil supply are a major concern for policymakers. These risks are likely to rise rather than fall, making a larger Strategic Petroleum Reserve (SPR) more necessary.

The current available funding to refill the SPR appears sufficient from an overseas import perspective. However, this might not be enough to account for the uncertainties in the global oil market.

Importing oil from Canada and Mexico poses relatively low disruption risk due to their robust economic ties with the US. Despite this, natural disaster risks still exist and should be accounted for by US policymakers.

To approach pre-2022 levels of gross oil import days cover, the SPR would need to rise to at least 550 million barrels. This would require several billion dollars in additional expenditures.

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The Strategic Petroleum Reserve, or SPR, is a crucial component of the US energy infrastructure. The US government has historically followed the International Energy Agency's (IEA) guidelines for the SPR, which calls for a 90-day net import cover.

However, the adequacy of this measure is being reevaluated as the US requires varying crude qualities and volumes that the IEA's standard doesn't fully capture. The US currently greatly exceeds the 90-day net import cover level set by the IEA.

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