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Tuesday, 07 February 2023
ForexLive Asia Forex News Wrap: Biden considering a 180m barrel draw from the US oil reserve

ForexLive Asia Forex News Wrap: Biden considering a 180m barrel draw from the US oil reserve

2022-10-31

 

The United States has a lot of oil. Some even say that it has too much oil. But it would seem that the Americans are at least thinking about ways to wean themselves off of foreign oil.

The vice president of the United States, Joe Biden, is considering making a 180-million-barrel draw from the nation’s strategic petroleum reserve to address a shortage in gasoline supplies.

Biden’s announcement comes as refinery problems in the northeastern part of the country have impacted gasoline supplies to some consumers in the Mid-Atlantic region.

We’ll talk about how the oil reserve works, how much oil it can theoretically draw from, and any other questions you might have about this topic.

What is a Strategic Petroleum Reserve?

The Strategic Petroleum Reserve, or SPR, was created by the Congress during the Arab oil embargo in 1975 as a fallback supply of oil to guard against future supply disruptions. The reserve is stored in salt caverns near Salt Lake City and is administered by the United States Department of Energy (DOE).

The SPR has been described as “the DoE’s insurance policy against energy crises.” If energy disruptions threaten the supply of oil to the United States, the SPR can act as a backup source of oil to help smooth out supply disruptions.

Currently, the SPR holds just under one million barrels of oil.

How much oil can the Strategic Petroleum Reserve draw?

The SPR has an oil capacity of up to 705 million barrels, but it currently holds just under one million barrels. The maximum amount of oil that the United States can draw from the SPR is determined by the level of oil production from the rest of the world and the amount that the United States imports.

For example, if the world oil supply were to remain at current levels but the United States were to increase its own oil production, the amount of oil that the United States can draw from the SPR would also increase.

If the United States were to completely stop importing oil, however, the maximum amount of oil that it could draw from the SPR would be just over 180 million barrels.

How the Strategic Petroleum Reserve works

Just as the name suggests, the SPR is intended to be a strategic reserve. The United States can always decide to draw down the SPR in times of economic stress and shortages in the oil supply.

 
 
 

When the United States implements the SPR drawdown, it is not actually removing oil from the reserve. Instead, it is using the authority granted by the Congress in the Energy Policy and Conservation Act of 1975 to “sell and make available for sale” oil from the reserve.

The DOE then acts as a broker, purchasing the oil at the current market price and delivering it to the refineries that need it. The refineries then have the option to purchase the oil at the market price or to simply take the oil at the appropriate loading terminal.

Is the Strategic Petroleum Reserve run by the government?

The SPR is operated by the United States government through a private contractor, Enterprise Products. Enterprise Products is currently owned and operated by Energy Transfer Partners, which is owned by Energy Transfer Equity.

The DOE still oversees the contracting process, but it hands out the contracts through a public bidding process.

The contract for the operation of the SPR runs until 2024 and has been extended twice, most recently in December 2015.

Is there more to the story than meets the eye?

There are lots of reasons to talk about the Strategic Petroleum Reserve, but one of the main ones is that the United States is currently sitting on about half a century’s worth of oil.

That is a lot of oil. Some even say that it has too much oil.

But the Americans are at least thinking about ways to wean themselves off of foreign oil. One way to do that is with the Strategic Petroleum Reserve.

Bottom line

The United States has a lot of oil. Some even say that it has too much oil. But it would seem that the Americans are at least thinking about ways to wean themselves off of foreign oil.

The vice president of the United States, Joe Biden, is considering making a 180-million-barrel draw from the nation’s strategic petroleum reserve to address a shortage in gasoline supplies.

Biden’s announcement comes as refinery problems in the northeastern part of the country have impacted gasoline supplies to some consumers in the Mid-Atlantic region. We’ll talk about how the oil reserve works, how much oil it can theoretically draw from, and any other questions you might have about this topic.

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