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Page added on January 27, 2017

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Strategic Petroleum Reserve sales expected to start this month

Public Policy

graph of planned strategic petroleum reserve crude oil sales, as explained in the article text

Source: U.S. Energy Information Administration, based on Strategic Petroleum Reserve
Note: Volumes sold under the Bipartisan Budget Act of 2015 Section 404 are estimates based on an assumption of $50 per barrel.

Yesterday the U.S. Department of Energy’s (DOE) Office of Fossil Energy awarded contracts for the first of several sales of crude oil from the Strategic Petroleum Reserve (SPR). A Continuing Resolution enacted in December 2016 included a provision for DOE to sell up to $375.4 million in crude oil from the SPR. This sale will be the first of several planned sales totaling nearly 190 million barrels during fiscal years 2017 through 2025.

As the largest stockpile of government-owned emergency crude oil in the world, the SPR was established to help alleviate significant oil supply reductions from occurrences such as major geopolitical events, severe weather, unplanned production curtailments, transport disruptions, and delivery outages. Located in four storage sites along the Gulf of Mexico, the SPR held more than 695 million barrels of crude oil as of January 13, or about 97% of its design capacity (713.5 million barrels).

Several recent acts of Congress have authorized sales from the SPR:

  • The Bipartisan Budget Act (Section 404), enacted in 2015, includes authorization for funding an SPR modernization program to support improvements deemed necessary to preserve the long-term integrity and utility of SPR’s infrastructure by selling up to $2 billion worth of SPR crude oil in fiscal years 2017 through 2020. Although the estimated volumes presented in the chart above are based on an assumed oil price of $50 per barrel, the actual final sales volumes will depend on how SPR decides to allocate the sales volumes across those fiscal years and the actual price of crude oil at the time of the sales. For the Section 404 sales, SPR must get an appropriation from Congress to approve its requested sales revenue target.
  • Another section of the Bipartisan Budget Act (Section 403) mandates SPR crude oil sales for fiscal years 2018 through 2025 on a volumetric basis, rather than on a dollar basis, as specified in Section 404. The revenues from sales authorized under section 403 will be deposited into the general fund of the U.S. Department of the Treasury.
  • The 21st Century Cures Act, enacted in December 2016, calls for the sale of 25 million barrels of SPR crude oil for fiscal years 2017 through 2019. The first portion of these sales is expected in late spring 2017.
  • The Fixing America’s Surface Transportation Act, enacted in December 2015, calls for SPR sales totaling 66 million barrels from fiscal years 2023 through 2025.

One of the SPR’s core missions is to carry out U.S. obligations under the International Energy Program (IEP), the 1974 treaty that established the International Energy Agency (IEA). Under the IEP, the United States must be able to contribute to an IEA collective action based on its share of IEA oil consumption. Based on the most recent shares, the United States must be prepared to contribute about 44% of the barrels released in an IEA-coordinated response. The United States government relies on using oil in the SPR to meet this requirement. Previously, in response to oil supply disruptions driven by hostilities in Libya in 2011, the United States contributed as much as 50% of the total IEA collective action.

As a member of the IEA, the United States is obligated to maintain stocks of crude oil and petroleum products, both public and private, to provide at least 90 days of net import coverage. Based on October 2016 levels of net crude oil and petroleum product imports, the SPR alone holds crude oil stocks equivalent to 145 days of import coverage. Private (commercial) stocks of crude oil provide another 489 million barrels, equivalent to another 102 days of import coverage.

graph of days of import coverage provided by strategic petroleum reserve, as explained in the article text

Source: U.S. Energy Information Administration, Petroleum Supply Monthly
Note: Days of import coverage reflects Strategic Petroleum Reserve level divided by net imports of crude oil and petroleum products.

More information about the role of the SPR is available on the DOE’s SPR web page.

www.eia.gov



20 Comments on "Strategic Petroleum Reserve sales expected to start this month"

  1. dave thompson on Fri, 27th Jan 2017 10:48 am 

    What is the big deal?

  2. BobInget on Fri, 27th Jan 2017 12:41 pm 

    If you are one of those that keep track, see if future SPR sales coincide with diminished imports.

    BTW: even though in the last few weeks consumption has lessened by weather related million barrels per day, we burned 133 million barrels (as compared to 140 million, average)
    SPR sales will account for six or seven hours consumption at best.

    For the week ending 1/21/07 EIA

    Total products supplied over the last four-week period averaged about 19.0 million
    barrels per day, down by 2.6% from the same period last year. Over the last four weeks,
    motor gasoline product supplied averaged about 8.3 million barrels per day, down by
    4.7% from the same period last year. Distillate fuel product supplied averaged over 3.4
    million barrels per day over the last four weeks, up by 1.3% from the same period last
    year. Jet fuel product supplied is down 3.4% compared to the same four-week period last
    year.

    Posted note: That jet fuel number is of most concern. First negative number in many months.
    Watch next week’s report carefully. IMO EIA will
    need to show consumption back up to 20 M Bp/d

    another posted note:
    If Mexico signs on with China as has Venezuela and Ecuador, US loses Mexican business.
    When a US President attacks mostly Catholic Latin Americans it makes the same flavor news as when DT diminishes Muslims.

  3. baha on Fri, 27th Jan 2017 12:48 pm 

    I don’t quite understand this article. Are we selling it to make money or because we are at war?

  4. dave thompson on Fri, 27th Jan 2017 1:39 pm 

    I cannot imagine this sale will make any difference except if there truly is a supply crisis in the future and the reserve is gone.

  5. rockman on Fri, 27th Jan 2017 4:49 pm 

    “I don’t quite understand this article. Are we selling it to make money or because we are at war?” First, if we arer going to sell SPR oil why not do it when we can sell for at least as much as we paid for it. The estimate taking into account inflation and overhead: $70/bbl.

    Second, the revenue will not be earmarked for any specific project. Goes into the general fund. Based on current oil prices the total sale would increase the general fund by 0.006%.

  6. rockman on Fri, 27th Jan 2017 4:51 pm 

    “…if there truly is a supply crisis in the future” = the sole reason tax payers have invested $50+ billion in the SPR.

  7. penury on Fri, 27th Jan 2017 5:43 pm 

    People tend to forget that the government spends at least a trillion dollars more than they rake in each year. That is why the Social Security trust fund is comprised strictly of treasury bills, why there is no gold in Ft Knox and various sections of government are always looking for ways to raise cash. The promises are always this will be paid back in the future. Would your gov lie to you? of course not, the future they were looking at has just not arrived yet.

  8. Davy on Fri, 27th Jan 2017 6:03 pm 

    Pen, concerning “why there is no gold in Ft Knox”. I have not seen anything yet that indicates the gold in FT Knox is not there. There are rumors from many different circles and this included Trump himself who questioned if the gold is there. If you have reliable references I would love to read them. It is a very interesting study.

  9. penury on Fri, 27th Jan 2017 8:30 pm 

    Davy, as no one who is not connected woth the Fed is allowed into Fort Knox it is hard to say what is in there. O think while he was Senator Ron Paul tried many times to get a inventory of the “gold” at the Fort and was denied every rine. I understand that there has been no inspection for the last twenty years to see if any gold or even titanium bars colored gold are even stored there.

  10. makati1 on Fri, 27th Jan 2017 9:10 pm 

    Penury, I would bet a months income that there is zero gold there. Or anything else of value. The fact that no one has seen it proves the assertion. If it was there and in the correct quantity, it would be a plus for the government to let everyone see it. That there is so much secrecy and denial of its sale is only going to make everyone doubt even more.

    Not that I care if it is filled with gold or lead or empty, dusty rooms. I expect the whole house of fiat cards to tumble any time. Or, the usual historical alternative, a world war to wipe the debt and hide the truth. Either way, Americans lose.

  11. Anonymous on Fri, 27th Jan 2017 10:53 pm 

    Then there is that whole episode where Germany wanted its gold back and Jewnited States ‘guvmint’ said, sure, come back in a few years and you get it back…well..some of it.

    http://www.mining.com/germans-give-up-on-getting-back-their-gold-held-in-us-45305/

    Appears Merkel ordered the whole thing stopped. A most faithful servant of Jew York and Tel Aviv would be hard to find…

  12. dave thompson on Sat, 28th Jan 2017 4:08 am 

    I thought this was about the oil reserves? WTF gold does not mean shit with out energy.

  13. rockman on Sat, 28th Jan 2017 8:36 am 

    Now, now Dave. We all believe in free speech. Even inappropriate speech. LOL.

  14. GregT on Sat, 28th Jan 2017 12:15 pm 

    Gold has been valued since long before the humans became hopelessly addicted to fossil fuels. Whether that will still be the case after the energy is no longer available, remains to be seen. Sovereign nations, banks, and the uber wealthy, certainly appear to think so.

  15. dave thompson on Sat, 28th Jan 2017 3:00 pm 

    If one side has the gold and one side has the food I am betti’n on the ones that eat the food.

  16. GregT on Sat, 28th Jan 2017 4:54 pm 

    I’d be more prone to bet that the side with the gold, will also be the side with the food. Kind of like it’s been for the last several thousand years or so.

  17. onlooker on Sat, 28th Jan 2017 5:01 pm 

    I would be willing to bet that in the end the ones with the biggest and baddest guns and other arms with keep the food and gold and anything else of value

  18. dave thompson on Sat, 28th Jan 2017 5:30 pm 

    The biophysical world will ultimately decide.

  19. GregT on Sat, 28th Jan 2017 9:40 pm 

    “The biophysical world will ultimately decide.”

    Completely agree dave.

  20. Davy on Sun, 29th Jan 2017 5:23 am 

    Diversity of your portfolio is always prudent. Investing long term and disregarding the business cycle is another. I have no money in the market because I chose to downsize with dignity and go underground as much as I can from traditional society. My point is directed towards prepping. Land, gold, cash, food, and guns/ammo are the basics of your prep portfolio. You diversify for a variety of risks. I often see mad max horror stories of what is ahead. A diversified prep portfolio will include investments for that. That is not the only possibility and those who either do not prep because of that or only prep for that may find they invested poorly. Many people say why prep if it will all be taken from you? How do you know that will be the case? There is no reason it could go another direction. The decline of civilization is all over the place. I think there are places that will fail and the worst case will likely occur but there are others where relative stability might continue.

    Gold is a good investment. Small coins are optimum for daily exchange possibilities. A 1/10 oz is like a $100 bill. If you have the luxury then also keep some oz coins or small bars if you have lots of money. Small coins have a higher transaction cost so you lose some value in their purchase. I have lots of long term food and shorter term food. I also have food on the hoof in the field. I have many tools for preserving and making food. I have big dogs, big guns and lots of ammo. I learned how to shoot and hunt at 13. I have land in a poor area where people fly over going to the nice places. That is fine by me. I am integrated with my local population and they are my friends. I have a friend in the White House that might just take my biggest danger of NUK war off the table for a few years. Missouri has some prime military and civilian targets.

    The most important part of prepping is attitude and lifestyle. Walk the walk and make it your lifestyle. Make what you do prep orientated. Learn new skills. Be good at many things and the master of a few. I mention this because we have entered a new phase in our history with nationalism. Nationalism in our circumstances is about pulling back not growing as globalism has been. This will ensure globalism will end. The speed of this decline is unknown but the trend is now increasingly apparent. With its end will come a world of less. A world of less with a trends of expectations of more is a bad combination. Do some basic prep if nothing else. It is not that painful and who knows you may become like me and take it up as your way of life.

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