In recent news, The United States Congress has agreed on a budget deal that would sell just over 8% of its Strategic Petroleum Reserve stocks from 2018 - 2025. Proceeds from the sale will be deposited into the general fund of the Treasury outlined in the budget plan to avoid a default on U.S. debt. The Strategic Petroleum Reserve (SPR) was developed as a national security measure that provides the President an emergency response option should a disruption in commercial oil supplies threaten the U.S. economy. Beyond an emergency release of supply, there have been non-emergency sales and exchange agreements, although uncommon, throughout its history.
The SPR is an emergency fuel storage of oil maintained by the United States Department of Energy. It is the largest emergency supply in the world with the capacity to hold up to 713.5 million barrels.
The SPR was created in 1975 in response to the 1973 OPEC oil embargo that placed enormous pressure on the U.S. economy that had grown increasingly dependent on foreign oil. At the time, Administration responded with multiple measures that focused on energy conservation and domestic energy independence.
Today the SPR’s inventory is just over 695 million barrels. The total investment to date is roughly $27.8 billion (facilities and oil) with an average price paid of $29.70 per barrel. Today oil prices are hovering around $45 per barrel.
The reserve is stored at four sites on the Gulf of Mexico, connected to the Nation’s commercial oil transport network with access to marine terminals, interstate pipelines and refineries. Each site contains a number of artificial caverns created in salt domes below the surface.
Individual caverns within a site can range from 2,000 to 4,000 feet below the surface. Average dimensions are 200 feet wide and 2,000 feet deep with capacity ranging from 6 to 35 million barrels. The decision to store in caverns was made in order to reduce costs; the Department of Energy claims it is roughly 10 times cheaper to store oil below surface with the added advantages of no leaks and a constant natural churn of the oil due to a temperature gradient in the caverns. The caverns were created by drilling down into a salt formation and then injecting massive amounts of water to dissolve the salt.
Storage by Site (as of August 31, 2015)
- Bryan Mound - Freeport, Texas. 20 caverns - 245 MMB.
- Big Hill - Winnie, Texas. 14 caverns - 162.3 MMB.
- West Hackberry - Lake Charles, Louisiana. 22 caverns - 213.2 MMB.
- Bayou Choctaw - Baton Rouge, Louisiana. 7 caverns - 73.6 MMB.