What is SPR, storing emergency oil that Biden can touch? By Reuters

Author: Timothy Gardner

WASHINGTON (Reuters) – The Biden administration is considering exploiting the U.S. Strategic Oil Reserve (SPR) to cool oil prices, along with other major consumers such as China and Japan.

This move may not have a long-term impact on the U.S. reduction. Oil prices hit seven-year high https://www.reuters.com/business/energy/oil-prices-rise-with-few-us-government-brakes-available-2021-11-09 above $ 85 a barrel in late October , analysts say.

The release of oil The Biden administration may dismiss criticism ahead of the midterm elections in 2022, which has done little to address rising prices. Moving along with other large consumers like China and Japan, Biden may also say that Saudi Arabia and Russia, members of the OPEC + production team, have resisted calls to send more oil to global U.S. markets.

Here are the problems with using SPR.

WHY WAS SPR CREATED?

The U.S. created the 1975 Arab oil embargo after rising gasoline prices and hurting the U.S. economy. Presidents have taken advantage of it to calm oil markets during the war or when hurricanes hit oil infrastructure across the U.S. Gulf of Mexico.

HOW MUCH OIL DOES SPRAK DISCONTINUE?

Today, the reserve has about 606 million barrels, and dozens of caves in four highly protected areas on the Louisiana and Texas coasts. That’s enough oil to meet U.S. demand for more than a month.

The country also maintains small reserves and gasoline reserves in the northeastern United States.

WHICH COUNTRIES HAVE STRATEGIC RESERVES?

In addition to the United States, 29 other member countries of the International Energy Agency (IEA), including the United Kingdom, Germany, Japan and Australia, must hold oil reserves in their reserves for the 90-day equivalent of net oil imports. Japan has one of these. the largest reserves after China and the United States.

China, an associate member of the IEA and the world’s second-largest oil consumer, founded SPR 15 years ago and held its first oil reserve auction https://www.reuters.com/world/china/china-tests-oil- 2021-09- With the first oil reserve-auction-15-inflation-battles-inflation in September. Another associate member of the IEA, India, the third largest oil importer and consumer, also maintains a reserve https://www.reuters.com/world/india/exclusive-india-starts-selling-oil-strategic-reserves-after- policy change-2021-08-17.

Overall, OECD governments had more than 1.5 billion gross barrels in September, according to the IEA. That is, about 15 days of global demand before the pandemic.

CAN OIL PEOPLE RELEASE OIL IN ONE?

U.S. presidents can coordinate an SPR release at the same time as discounts made by reservations made by other IEA members. The potential liberation involved in China and India would be the first instance in which the U.S. coordinated a release that included these two nations.

HOW DOES SPR GET OUT OF MARKETING OIL?

Because it is close to major U.S. refining or petrochemical centers, SPR can ship 4.4 million barrels a day. It may take only 13 days from the presidential decision to enter the U.S. market for the first oil, according to the Department of Energy.

According to a sale, the Department of Energy typically conducts an online auction, and energy companies bid for oil. According to an exchange, oil companies take the crude, but are forced to return it, plus interest.

U.S. presidents have three times allowed emergency sales from the SPR, most recently in the 2011 OPEC war in Libya. Sales were also in the Gulf War in 1991 and after Hurricane Katrina in 2005.

Oil exchanges have been more frequent, with the last exchange after Hurricane Ida in September.

WHAT IS THE ROLE OF THE IEA IN NATIONAL SPRS?

The IEA helps coordinate the dismissal of members, provides data on levels, and performs other tasks.

There are usually three ways to meet the 90-day requirement to maintain SPR levels, according to the IEA website: refined commercial stocks, government and agency stocks, which countries choose which balance to maintain. The condition structure is reviewed every five years among members.

The IEA says that measures can also be taken to reduce demand or otherwise support supply. These include calls for voluntary fuel savings, to change fuels, such as to generate electricity instead of oil instead of gas, or to quickly “underground production” to leave underground reserves.

The IEA says easing environmental regulations can help make supply more flexible.