President Joe Biden ordered the release of oil from his strategic oil reserve on November 23, 2021, as part of a coordinated effort with five other countries to curb rising fuel prices. The US plans to produce 50 million barrels of crude oil in the coming months, while other countries – the UK, India, Japan, Korea and China – are reported to have a combined output of about 11 million barrels.
But what is the Strategic Oil Reserve, what was it created for and when was it used? And does that serve the purpose, given that the US exports more oil and other petroleum products than it imports?
As an energy researcher, I believe that looking at the history of the reserve can help answer these questions.
The origins of the reserve
Congress created the Strategic Oil Reserve under the Energy Policy and Energy Conservation Act 1975 in response to the global oil crisis.
Arab oil-exporting countries, led by Saudi Arabia, cut supplies to the world market due to Israel’s support from the West in the 1973 Yom Kippur War. Oil prices have quadrupled, causing severe economic damage to the United States and other countries. It also shocked the average American accustomed to cheap oil.
The oil crisis forced the United States, Japan and 15 other developed countries to form the International Energy Agency in 1974 to recommend policies that would prevent such events in the future. One of the agency’s key ideas was to create emergency oil reserves that could be used in the event of a serious supply disruption.
Department of Energy
Originally, the Law on Energy Policy and Energy Conservation stipulated that reserves should contain up to 1 billion barrels of crude oil and petroleum products. Although they have never reached this size, the US reserves are the largest in the world, with a maximum volume of 713.5 million barrels. It currently contains just over 600 million barrels of crude oil.
The oil in reserve is stored underground in a series of large underground salt domes at four locations along the Gulf Coast of Texas and Louisiana and is linked to major pipelines in the region.
Salt domes formed by pushing a mass of salt upward are a good choice for storage because salt is impermeable and has low solubility in crude oil. Most of the storage facilities were acquired by the federal government in 1977 and fully operational in the 1980s.
Drawdown history
In a 1975 law, Congress determined that the reserve was intended to prevent “major supply disruptions,” that is, a real shortage of oil.
Over time, as the oil market changed, Congress expanded the list of reasons the SPR could be involved, such as interruptions in domestic supply due to extreme weather conditions.
More than 230 million barrels of crude oil had been produced prior to the last drawdown since the reserve was created. The production volume in November 2021, 50 million barrels, is the largest to date.
In the entire history of the reserve, there were only three emergency releases. The first occurred in 1991, after Iraq’s invasion of Kuwait a year earlier, which led to a sharp drop in oil supplies to the world market. The US produced 33.75 million barrels.
The second release, worth 30 million barrels, occurred in 2005 after Hurricanes Rita and Katrina disabled production in the Gulf of Mexico, which then accounted for about 25% of US domestic supplies.
The third release was coordinated by the International Energy Agency in 2011 as a result of supply disruptions from several oil-producing countries, including Libya, which then faced civil unrest during the Arab Spring. Overall, the IEA coordinated the release of 60 million barrels of crude oil, half of which came from the United States.
In addition, 11 oil sales from the reserve were planned, mainly to generate federal revenues. One of them – in particular the sale in 1996-1997 to reduce the federal budget deficit – seemed to serve political purposes, not the purposes of the proposal.
Biden’s decision to use reserves was also perceived by the Republicans as political, because there was no extreme shortage of supplies. The White House said part of the release is accelerating planned sales approved by Congress, while the rest is an exchange that will eventually return to the reserve.
AP Photo / Noah Berger
Do you still need a reserve?
With the US today as a net exporter of oil, the Strategic Oil Reserve has entered a new era. Some of its original motives and functions – to be used in emergencies to secure a stable supply of oil to the United States – have disappeared.
And efforts to reduce global carbon emissions and oil use – with more electric cars and other vehicles on the road, for example – will likely only diminish the need for such reserve.
Indeed, Congress has recognized the fact that oil exports are declining. It provides for annual sales from the reserve from early 2017 to 2028 – a total of 271 million barrels.
But as long as there are reserves, Biden’s use of them primarily in the hopes of lowering gas prices – which will take time to have any effect, if any – suggests that Americans will see many more similar releases in the coming years.
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