Does the US Actually Need its Strategic Petroleum Reserve?

With the capacity to hold up to 727 million barrels, the USA boasts the largest Strategic Petroleum Reserve on the planet. It bolsters the nation with serious ‘rainy day’ backup, but now some experts are speculating that the SPR may have outlived its purpose. One of the key questions being asked is whether the SPR still makes sense given the current landscape of US oil production?

After more than 40 years, is it time to retire?

The SPR was first established in 1975, following the 1973 OPEC oil embargo. Congress set it up “to reduce the impact of severe energy supply interruptions” caused by events like the embargo. For decades it served its purpose, but now some analysts argue that it’s obsolete.

In the wake of mass US shale oil production, America’s demand for OPEC crude oil imports has drastically fallen over the past decade. In 2005, the USA was importing around 10.1 million barrels per day of crude oil, with 4.8 million sourced directly from OPEC. Yet in 2016, stateside imports had dropped to just 7.9 million, with just 3.2 million coming from OPEC.

US shale bolsters energy security

No doubt about it, US energy security has improved. Imports are down, which means that oil stashed in the SPR will last much longer should foreign supplies dry up. Back in 2005, the SPR housed 685 million barrels. Factoring in imports of 10.1 million BPD, this was enough to power the USA for 68 days. In 2016, America increased its supply to 695 million barrels. At the reduced rate of US crude oil imports, this provides the nation with an 88 day supply.

Given these figures, it comes as no surprise that President Trump is calling for a new national budget that would see America sell 50% of its SPR. Assuming oil prices continue to hover around the current range, this would generate estimated revenues of nearly $16.6 billion from 2018 to 2027.

Of course, this is a risk. Ultimately, the US still depends on OPEC for 40% of its imports, which means that supply disruptions could hit hard. So, while self-sufficiency is improving, until the US can push its OPEC dependence down to negligible levels the SPR will continue to serve its purpose.

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