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Page added on December 30, 2008

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Is Time Right To Top Off U.S. Oil Reserve?

At a time that the federal government is printing money faster than postage stamps, any dollar windfall comes as welcome news.

Such is the case with the Strategic Petroleum Reserve. Last May, with oil surging toward its historic peak near $150 a barrel, Congress ordered a halt to filling the emergency reserve in a near-unanimous vote.

Timing is everything, and this is one instance where Congress got it right. Since their July peak, oil prices have dived by nearly $110 a barrel. Just in time to take advantage of this collapse, the suspension ends Dec. 31. In the New Year, the U.S. is free to resume filling the Strategic Petroleum Reserve.

The SPR, which houses oil in underground salt caverns in Texas and Louisiana, is designed to protect against a disruption in oil supply. Reserves come from oil companies that make “in-kind” payments of royalties they owe for using federal lands.

Oil that is not used to fill the SPR can be sold on the open market. Because of the filling halt, the U.S. was able to sell oil during the second half of 2008 at historically high market prices.

How much oil was freed up for sale? With the SPR now at 97% of capacity, it would take roughly 17 million barrels to fill it up, the Energy Department estimates.

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