Strategic Petroleum Reserve

Definition: The Strategic Petroleum Reserve is the world's largest stockpile of emergency crude oil. It is managed by the U.S. Department of Energy to provide a supply of oil in case of emergency. It only takes 13 days for the oil to enter the U.S. market from the time the President first gives the order.

The Federal government owns all of the oil held. Fortunately, the government only paid $29.76 per barrel (on average). The facility only cost $22 billion. Of that, $5 billion was a fixed cost to pay for the facility, and $17 billion paid for the oil.

The oil is stored in four underground salt caverns on the coast of the Gulf of Mexico. The storage caverns can hold 727 million barrels. It reached that total fill level for the first time in December 2009. The federally-owned reserves can replace about three months worth of imports, should that ever become necessary. It can draw down 4.4 million barrels per day.

Every time gas price approach $4 a gallon, there are calls to release oil from the SPR. However, there are strict guidelines that control when the oil can be released. These are defined in the Energy Policy and Conservation Act (EPCA).

1. The President can order a full drawdown if there is a long-term energy shortage that threatens national security or the economy.
2. The President may order a limited drawdown of less than 30 million barrels if there is a significant oil shortage.
3. The Secretary of Enegy can carry out test drawdowns of less than 5 million barrels.

(Source: U.S. Department of Energy, Strategic Petroleum Reserves)

The Strategic Petroleum Reserve was used to replace oil production lost as a result of Hurricane Katrina during the fall of 2005. That's because gas prices had skyrocketed to $5 gallon. Oil refineries and transportation had been damaged by the Hurricane. The SPR helped keep gas prices at an affordable level until this infrastructure had been repaired. The SPR released 20.8 million barrels.