The Strategic Petroleum Reserve (SPR) is an emergency supply of crude oil that can be used to offset a severe oil supply shortage. If, for example, a portion of our oil imports or domestic production were cut off, we could draw from the SPR for the oil we need. Only the President of the United States can give permission to use it.
Role of the SPR
Maintaining the Strategic Petroleum Reserve is an important national security tool to combat disruptions in the oil market. The reserve is intended to be America’s insurance policy against a severe oil supply disruption or a severe economic disruption. We strongly oppose the use of oil stockpiles to affect gasoline prices. Market interference makes us all more vulnerable and is counterproductive to long-term adjustments in the marketplace. A better solution is to enhance, not stifle or shut-down, America’s leadership in natural gas and oil production.
If the government regularly released SPR oil for sale each time domestic fuel prices rose, we could reduce our ability to address a situation with the potential to seriously injure the U.S. economy. In addition, a draw-down of the reserve might not have the desired result.
Over the past few days, several Members of Congress have urged the White House and the Department of Energy to sell oil from the Strategic Petroleum Reserve (SPR). They seek crude oil sales from the Reserve to relieve the recent spikes in gasoline prices, not because there is a crude oil supply emergency, but more so a political problem for them.
At issue is what role should the SPR play in responding to product price spikes and temporary shortages. The answer is none.
The SPR was created to deal with crude oil supply emergencies. There is at this time no crude oil supply emergency either domestically or worldwide.
The Independent Petroleum Association of America has long held the position that the SPR should not be used to manipulate the crude oil market or product markets. It should be a safety net in case of disruption of crude oil supplies. Policy makers should oppose all non-emergency sales of oil.
The SPR was created to provide the United States with crude oil in the event of a severe oil supply or economic disruption. According to the U.S. Statement of Policy on the SPR, issued on May 13, 1998, the “Reserve should be used solely for responding to the types of severe oil supply interruptions presently contemplated in the Energy Policy and Conservation Act.”
The sale of SPR oil now could destabilize the fragile oil market. After eighteen months of historically low oil prices that devastated the domestic oil and natural gas industry, oil prices have now returned to the levels they were pre-pandemic.
However, the sale of SPR oil at this time when supplies are adequate to meet domestic needs could easily undermine the market and drive the domestic industry back into economic turmoil.
While the Reserve is a strategic national and energy security resource, policy makers must recognize that domestic oil production is America’s true “strategic petroleum reserve.” It is this production that would be harmed if the market is destabilized. Oil is this nation’s economic lifeblood. Without a stable oil supply the U.S. economy and the world’s economic health are at risk.
(Courtesy of IPAA/Statement on Strategic Petroleum Reserve from Jeff Eshelman, IPAA Chief Operating Officer)