What Are Strategic Petroleum Reserves?

Strategic petroleum reserves (SPRs) are stoc🌠kpiles of crude oil maintained by countries for release in the event of a supply ༒disruption.

The U.S. Strategic Petroleum Reserve (SPR) is the world's largest, with an authorized maximum capacity of 727 million barrels. The U.S. government has historically tapped into its SPR following human-caused accidents, economic crises, and natural disasters, though it has also sold and loaned crude oil from the SPR to other nations at times.

Understanding Strategic Petroleum Reserves

Strategic petroleum reserves can help a cou😼ntry weather a sudden and tempora♕ry disruption in supply after a natural disaster, accident, or the imposition of economic sanctions.

Strategic reserves are stockpiles of crude oil that have already been extracted and can be promptly refined into fuels. They are not to be confused with proved oil reserves, an estimate of crude still in the ground that could be e🌄xtracted in the long term.

Because storage faciliti🃏es are limited relative to petroleum consumption, strategic reserves typically cannot fully offset disruptions lasting more t𝓡han a few months. Releases from reserves represent a one-time addition to supply rather than a permanent increase in availability.

Examples of Strategic Petroleum Reserves

The U.S. SPR is located in four vast salt dome caverns along the Gulf Coast. Created in response to the oil crisis caused by the Arab Oil Embargo of 1973, the SPR received its first shipment of crude in 1977.

The U.S. government ordered releases from the SPR after Hurricane Katrina in 2005 and Hurricane Gustav in 2008 disrupted energy production in the Gulf Coast region. In 2022, the U.S. also drew from the SPR in response to rising inflation and high gasoline prices in response to the disruptions 澳洲幸运5官方开奖结果体彩网:caused by Russia's invasion of Ukraine.

China is thought to hold the world's second-largest strategic reserve, though it does not regularly publish data on its capacity or holdings. In 2024, China's strategic reserves reportedly held crude equivalent to 40 or 50 days of imports, roughly 290 million barrels at the midpoint.

Japan held public strategic reserves equivalent to 202 days of crude oil imports at the end of 2024, according to the 澳洲幸运5官方开奖结果体彩网:International Energy Agency (IEA). At 3.37 million barrels per day (December 2023 data), that would amount to about 670 million barrels. Commercial stocks amounted to 81 days of imports.

Releasing Reserves From the SPR

Under the Energy Policy and Conservation Act, a U.S. president can order a full drawdown of the reserve to counter "a severe energy supply disruption" and a limited one of up to 30 million barrels over a 60-day period to avert such disruptions. The same law permits the Department of Energy to conduct test drawdowns of up to 5 million barrels.

Releases from the SPR can take the form of loans or outright sales of oil. In a loan or exchange, the reserve provides crude to a company, typically a refiner, which must eventually return the same volume of crude along with additional barrels as interest. Exchanges typically take place in cases of localized⛎ disruption, such as a shipping channel blockage, and must be deemed to be in the public interest.

The DOE also may release crude oil by selling it directly to commercial suppliers via an online competitive bidding process. After a presidential order of an emergency sale, the Department of Energy needs 13 days to conduct a sale, select offers, award contracts, and prepare deliveries.

Replenishing Strategic Petroleum Reserves

In purchasing crude for the SPR, the Department of Energy is required to consider the needs to support domestic supply, protect national security, minimize costs and avoid disrupting markets or market prices.

The president must decide whether and when to replenish the reserve. For example, in March 2020, then-President Donald Trump ordered the Department of Energy to fill the SPR to capacity by purchasing 77 million barrels of crude oil as demand and oil prices slumped amid the COVID-19 pandemic. But Congress never provided the needed funding, and the purchase plans were canceled. This proved unfortunate, as the SPR was needed in 2022 following Russia's invasion of Ukraine and rising oil prices.

The Bottom Line

A strategic petroleum ♓reserve is an emergency reserve of petroleum a country stockpiles to deal with shortages or other petroleum issues. The U.S. has the largest SPR in the world.