Washington: Biden The administration is considering exploiting US Strategic Petroleum Reserve ,SPR) in conjunction with other large consumers such as China and Japan to cool oil prices.
Analysts say such a move may not have a long-term impact on the fall in US oil prices, which hit a seven-year high at $85 a barrel in late October.
The release of oil could allow the Biden administration ahead of the 2022 midterm elections to shun criticism that it has done little to counter rising prices. Combined with other big consumers such as China and Japan, it could also allow Biden to say he took action after Saudi Arabia and Russia, members of the OPEC+ production group, called on the US to pump more oil into global markets. resisted the call.
Here are the issues surrounding using SPR.
Why was the SPR created?
The United States created the SPR in 1975 when the Arab oil embargo raised gasoline prices and damaged the American economy. Presidents have tapped the reserves to calm oil markets during wars or when hurricanes affect oil infrastructure along the US Gulf of Mexico.
How much oil does SPR hold?
The reserve currently holds about 606 million barrels in dozens of caves in four heavily protected locations on the Louisiana and Texas coasts. That’s enough oil to meet US demand for more than a month.
The country also maintains small thermal oil and gasoline reserves in the US northeast.
What are the strategic reserves with other countries?
In addition to the United States, the other 29 member countries of the International Energy Agency (IEA), including the United Kingdom, Germany, Japan and Australia, are required to hold oil in emergency reserves equivalent to 90 days of net oil imports. Japan has the largest reserves after China and the United States.
China, an associate member of the IEA and the world’s second major oil consumer, created its SPR 15 years ago and held its first oil reserve auction in September. Another IEA associate member, India, the third largest oil importer and consumer, also maintains a reserve.
Overall, OECD governments had more than 1.5 billion barrels of crude oil as of September, according to the IEA. This is about 15 days of global demand before the pandemic.
Can those countries release oil together?
The US President may coordinate the SPR release with the reduction of reserves by other IEA members at the same time. A possible release involving China and India would be the first instance in which the US coordinated a release involving those two nations.
How does oil reach the market?
Due to its location near large US refining or petrochemical centers, SPR can ship up to 4.4 million barrels per day. According to the Department of Energy, it may take only 13 days from the president’s decision for the first oil to enter the US market.
As part of a sale, the Department of Energy usually conducts an online auction in which energy companies bid on oil. Under a swap, oil companies take the crude oil, but they are required to return it, plus interest.
US presidents have authorized emergency sales from the SPR three times, most recently in 2011 during the war in OPEC member Libya. Sales also went up during the Gulf War in 1991 and after Hurricane Katrina in 2005.
Oil swaps have happened more frequently, with the last exchange held in September after Hurricane Ida.
What is the role of the IEA in the National SPR?
Helps coordinate IEA member releases, provides data across levels and performs other roles.
According to the IEA website, there are typically three methods for maintaining SPR levels to meet the 90-day requirement: commercial stock held by refiners, with government and agency shares, with countries that hold it. Choose to maintain balance. The stockholding structure is reviewed among the members every five years.
The IEA says measures can also be taken to rein in demand or help with supply. These could include calls for voluntary fuel savings, fuel-switching such as oil-to-gas for power generation or “increased production” to quickly tap underground reserves.
The IEA says easing environmental standards could help make supplies more resilient.
Analysts say such a move may not have a long-term impact on the fall in US oil prices, which hit a seven-year high at $85 a barrel in late October.
The release of oil could allow the Biden administration ahead of the 2022 midterm elections to shun criticism that it has done little to counter rising prices. Combined with other big consumers such as China and Japan, it could also allow Biden to say he took action after Saudi Arabia and Russia, members of the OPEC+ production group, called on the US to pump more oil into global markets. resisted the call.
Here are the issues surrounding using SPR.
Why was the SPR created?
The United States created the SPR in 1975 when the Arab oil embargo raised gasoline prices and damaged the American economy. Presidents have tapped the reserves to calm oil markets during wars or when hurricanes affect oil infrastructure along the US Gulf of Mexico.
How much oil does SPR hold?
The reserve currently holds about 606 million barrels in dozens of caves in four heavily protected locations on the Louisiana and Texas coasts. That’s enough oil to meet US demand for more than a month.
The country also maintains small thermal oil and gasoline reserves in the US northeast.
What are the strategic reserves with other countries?
In addition to the United States, the other 29 member countries of the International Energy Agency (IEA), including the United Kingdom, Germany, Japan and Australia, are required to hold oil in emergency reserves equivalent to 90 days of net oil imports. Japan has the largest reserves after China and the United States.
China, an associate member of the IEA and the world’s second major oil consumer, created its SPR 15 years ago and held its first oil reserve auction in September. Another IEA associate member, India, the third largest oil importer and consumer, also maintains a reserve.
Overall, OECD governments had more than 1.5 billion barrels of crude oil as of September, according to the IEA. This is about 15 days of global demand before the pandemic.
Can those countries release oil together?
The US President may coordinate the SPR release with the reduction of reserves by other IEA members at the same time. A possible release involving China and India would be the first instance in which the US coordinated a release involving those two nations.
How does oil reach the market?
Due to its location near large US refining or petrochemical centers, SPR can ship up to 4.4 million barrels per day. According to the Department of Energy, it may take only 13 days from the president’s decision for the first oil to enter the US market.
As part of a sale, the Department of Energy usually conducts an online auction in which energy companies bid on oil. Under a swap, oil companies take the crude oil, but they are required to return it, plus interest.
US presidents have authorized emergency sales from the SPR three times, most recently in 2011 during the war in OPEC member Libya. Sales also went up during the Gulf War in 1991 and after Hurricane Katrina in 2005.
Oil swaps have happened more frequently, with the last exchange held in September after Hurricane Ida.
What is the role of the IEA in the National SPR?
Helps coordinate IEA member releases, provides data across levels and performs other roles.
According to the IEA website, there are typically three methods for maintaining SPR levels to meet the 90-day requirement: commercial stock held by refiners, with government and agency shares, with countries that hold it. Choose to maintain balance. The stockholding structure is reviewed among the members every five years.
The IEA says measures can also be taken to rein in demand or help with supply. These could include calls for voluntary fuel savings, fuel-switching such as oil-to-gas for power generation or “increased production” to quickly tap underground reserves.
The IEA says easing environmental standards could help make supplies more resilient.
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