Gas prices always become an issue in the summer months, as Americans hit the road for holiday travel. Only this year, there may be another factor in the discussion: the Strategic Petroleum Reserve.
The nation’s Strategic Petroleum Reserve (SPR) was launched in 1975 with the Energy Policy and Conservation Act. It currently holds around 360 million barrels of oil. That is down from over 600 million barrels of oil in 2021, and a peak capacity of 727 million barrels back in December 2009. Does this pose an energy risk to the nation?
To answer that question, one must look at other metrics that capture how much oil is being used, how much is being extracted from reserves and how much oil lies in reserve around the United States.
The U.S. consumes around 20 million barrels of oil per day, which translates to around 7.3 billion barrels per year or around 22 barrels per person per year. If no additional oil were drilled, the current strategic reserve would be depleted in just 18 days. However, even if the reserve were filled to its historical peak capacity, it would require just 36 days to drain it dry.
Of course, oil drilling is ongoing, with over 48 billion barrels of oil in proved reserves. This represents 66 times the peak capacity of the SPR. Therefore, there is ample oil in reserves available, though the time necessary to extract it from the ground is significantly longer than releasing SPR oil.
Oil was released from the strategic reserve in 2022, as gasoline prices surged following the onset of the Russian war on Ukraine. This brought the SPR down to its current levels. Adding 360 million barrels to the reserve to bring it back up to full capacity would cost around $30 billion at today’s oil prices.
An oil reserve like the SPR serves to buffer short-term disruptions occurring from unexpected events, not long-term structural changes in the oil supply. Short-term disruptions may include a hurricane in the Gulf Coast or a cyberattack that upends drilling or pipeline operations. Anything that could disrupt the short-term supply of oil is game for tapping into the SPR. Any events that have long-term consequences on oil drilling or supply, on the other hand, are ill-suited to be addressed using the strategic reserve.
Presidents have used the reserve in hopes of dampening prices of gasoline at the pump. They include Bill Clinton, Barack Obama and, most recently, Joe Biden. Donald Trump also siphoned oil out of the SPR during his first three years in office.
Should the SPR be replenished to full capacity? It depends on how much risk reduction benefits the country needs in the event of a disruption of oil drilling, and the cost of maintaining the oil. Any short-term drawdowns should be accompanied by a schedule for how and when it will be restored.
Given the relatively modest size of the SPR, in terms of the number of days of demand that it can cover if oil drilling dropped to zero — a highly improbable event — its impact on the nation is minimal. And though the reserve, like any inventory, costs money to maintain (at today’s oil prices, a fully stocked SPR contains around $60 billion of value), considering the size of the federal budget, the cost of the oil in the SPR is negligible. What it buys in the event of an unexpected oil disruption is time to evaluate the situation and make thoughtful decisions rather than haphazard choices that could have deleterious consequences well into the future.
Therefore, restoring it to its previous highpoint of 727 million barrel is prudent, particularly with ongoing conflicts in Ukraine and Gaza.
The SPR will not permanently solve any long-term oil supply or production disruption problems. Much like an insurance policy, its cost to maintain is lost if the insurance is not needed, while covering a loss that could have far larger consequences.
In this way, the SPR may buy time to make the necessary adjustments so that effects at the gas pump and in people’s wallets can be dampened. For this purpose, keeping the SPR at full capacity, and replenishing it when oil prices dip during periodic price fluctuations, is a wise decision.
Sheldon H. Jacobson, Ph.D., is a professor of Computer Science at the University of Illinois at Urbana-Champaign. He applies his expertise in data-driven risk-based decision-making to evaluate and inform public policy.