Among the many geopolitical issues going on in the world effecting the oil market, there have been reports this week that President Trump is considering tapping into the Strategic Petroleum Reserve (SPR) in an effort to lower gasoline prices. According to Bloomberg, “options are under consideration ranging from a 5 million barrel test sale to a more sizeable release of 30 million barrels and a third option of a larger release that would be coordinated with other nations.” Utilizing any of these options would create a shift in global crude oil prices.
Strategic Petroleum Reserve
Starting in 1977 the United States has acquired 62 enormous salt caverns along the coastlines of Louisiana and Texas to store crude. The salt caverns were developed by drilling wells into the huge salt domes and injecting them with freshwater to dissolve the salts. The dissolved salt solution is then transported by pipes to disposal wells. By enacting this process of “solution mining” precise dimensions are created which can hold anywhere from 6-35 million barrels of oil, as stated in the diagram. These reserves are used in the event of national disasters, major storms, or outages in oil producing countries. Last year when Hurricane Harvey hit Texas, 5.3 million barrels of oil were sold from the government to four refiners to help aid in the fuel shortage. Currently, we have 260.1 million bbls of sweet crude (petroleum with less than 0.42% sulfur) and 405.4 million bbls of sour crude (petroleum containing high levels of sulfur) totaling 665.5 million bbls since March 9th 2018. This week the U.S. Department of Energy said it would sell 7 million barrels of sweet crude oil to comply with a law enacted in 2015 to help fund the government. The DOE will be accepting offers on this oil until March 21st and deliveries will hail from the SPR West Hackberry site from May 1st – 14th and from May 1st – 31st from the Bryan Mound site.