Q & A: Strategic Petroleum Reserve

Interview

By:  Chuck Grassley
Date: March 11, 2011
Location: Unknown

Q. What is the U.S. Strategic Petroleum Reserve?

A. It's a government-owned stockpile of petroleum. The United States has the largest reserve of this kind in the world. As of November 30, 2010, the reserve contained more than 726 million barrels of oil. The maximum storage capacity of the reserve is 727 million barrels. It's housed in underground salt caverns along the coast of the Gulf of Mexico.

Q. When did the government start stockpiling petroleum?

A. The idea of a petroleum stockpile had been floating around since 1944, when the Secretary of the Interior advocated one. The reserve was created after the 1973-1974 oil crisis caused by the Arab oil embargo. The embargo lasted from October 1973 to March 1974. President Ford signed the law creating the reserve on December 22, 1975, and the first barrels of petroleum were deposited in July 1977.

Q. When can the reserve be tapped?

A. The Energy Policy and Conservation Act of 1975 says that the reserve can be tapped under a presidential order for a full or limited drawdown to counter a severe energy supply interruption, or by an order from the Secretary of Energy to sell or exchange less than five million barrels. The Secretary can do this to test the readiness of the reserve and its personnel or as a solution to short-term oil delivery problems. In the event of a presidential order for a drawdown, petroleum from the reserve can enter the market within 13 days. In 34 years, there have been only two presidential orders to tap the reserve. The first was in 1991, at the beginning of Operation Desert Storm, when war in the Persian Gulf threatened global oil supplies. The second was in 2005, after Hurricane Katrina caused severe damage to the oil industry in the United States.

The Strategic Petroleum Reserve can be pumped at a maximum rate of 4.4 million barrels per day. According to the Energy Information Administration, the United States currently consumes more than four times that much petroleum each day, or about 19 million barrels. At that rate, the reserve holds less than 39 days' worth of petroleum.

Today, some observers are calling for the President to release crude oil from the Strategic Petroleum Reserve in response to rising gasoline prices resulting from turmoil in the Middle East. However, the latest information from the Department of Energy shows that crude oil and gasoline inventories in the United States are at or above historical levels. Also, the way I see it, depleting the emergency reserve is like eating your seed corn. It's a short-term solution, at best.

Q. What should be done as a long-term solution to our energy needs?

A. For long-term energy independence, America needs an all-of-the-above approach. We need to drill for oil and gas in the United States, we need conservation, and we need to expand the use of clean coal, nuclear, ethanol, biodiesel, biomass and wind energy. Many of these alternative energy sources are already being produced in Iowa and elsewhere in the United States. Anyone who's driven along Interstate 80 has seen the wind turbines that produce electricity, and the fields that grow corn for ethanol. Right now, ethanol is the only renewable fuel that is substantially displacing petroleum and working to reduce U.S. dependence on foreign energy sources. The 13 billion gallons of ethanol that were produced in 2010 will reduce oil demand by about 455 million barrels. And, the first generation of ethanol, made from corn, has made possible the development of biofuels from cellulosic materials such as switchgrass, corn stover, and wood wastes, greatly reducing greenhouse gas emissions.