How Big A Problem Is America’s Shrinking Oil Reserve?

Authored by Robert Rapier via OilPrice.com,

• The Strategic Petroleum Reserve, which was established in 1975 as a reaction to the 1973 oil embargo, is now at its lowest level since December 1984.
• Ultimately, the SPR is not as important today as it was in the past, in large part that is because the U.S. is no longer heavily reliant on oil imports.
• Historically the SPR tends to grow during Republican administrations and fall during Democratic administrations, although it did fall by 10% under Trump.

What is the U.S. Strategic Petroleum Reserve (SPR)? What are the implications of depleting the SPR, which the U.S. has been doing now since 2016? Further, what has been the impact of the rapid drawdown of the SPR that has taken place this year? Let’s discuss.

SPR 101

In December 1975, with memories of gas lines fresh on the minds of Americans as a result of the 1973 OPEC oil embargo, Congress established the Strategic Petroleum Reserve (SPR). The law was designed “to reduce the impact of severe energy supply interruptions” such as that caused by the embargo. Over time the U.S. government began to fill the reserve. At its high point in 2010, the level reach 726.6 million barrels. Since December 1984, the level has never been lower than 450 million barrels — until now.

Some have noted that the SPR is less important than it once was. U.S. shale oil production has enhanced American energy security and lessened the importance of the SPR by reducing our dependence on imports.

Consider that in 2005, the U.S. imported 10.1 million barrels per day (BPD) of crude oil, of which 4.8 million BPD (~48%) came from OPEC. The SPR contained 685 million barrels. With the U.S. importing 10.1 million BPD of crude oil at that time, that was enough oil to cover 68 days of supply.

In 2021, the U.S. imported 6.1 million BPD, of which only 800,000 BPD came from OPEC. More importantly, a lot of that imported oil was refined and re-exported as finished products. Net imports of U.S. crude oil and finished products were actually -62,000 BPD (i.e., the U.S. was a net exporter).

Thus, one could certainly argue that the SPR is of less strategic importance than it once was, and that perhaps we no longer need a 700 million barrel reserve of oil.

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