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“Is The Recent Strategic Petroleum Reserve Crude Oil Release Wise?”

image credit: SPR crude storage piping
Ron Miller's picture
Principal Reliant Energy Solutions LLC

Ron Miller is an energy industry expert creating value by analyzing assets, markets, and power usage to identify, monetize, and implement profitable energy and emission reduction projects. He is...

  • Member since 2020
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  • May 10, 2022

President Biden announced in late March that he would release 1 million barrels of crude oil per day from the Strategic Petroleum Reserve (SPR) over a 180 day period, making it by far the largest release ever. Is this a wise move and will it achieve the objectives sought?


The origin of the U.S. SPR stems from the 1973 Arab-Israeli War, responding to the threat from the Organization of Arab Exporting Countries (OAPEC) to impose an oil embargo on the United States, the Netherlands, and Canada.

One of the original perceptions of the value of a strategic stockpile was that its very existence would discourage the use of oil as a political weapon. The SPR was established to counter a disruption in commercial oil supplies which could threaten the U.S. economy.

The SPR was created, and on December 22, 1975, the policy was set for the United States to establish a reserve up to 1 billion barrels of petroleum located at a number of existing storage sites acquired in 1977, shown in Figure 1.

Figure 1 – Location of SPR Crude Storage Facilities On The U.S. Gulf Coast

The crude oil reserve is stored at four sites on the Gulf Of Mexico, each located near a major center of petrochemical refining and processing. Each site contains a number of artificial caverns created in salt domes below the surface. Storage of crude in salt caverns is estimated to cost roughly $3.50/barrel while above-ground storage of product in tanks might cost $15-$18/barrel.

The Energy Policy and Conservation Act (EPCA, P.L. 94-163) authorized drawdown of the Reserve upon a finding by the President that there is a "severe energy supply interruption." This was deemed by the statute to exist if three conditions were joined: If "(a) an emergency situation exists and there is a significant reduction in supply which is of significant scope and duration; (b) a severe increase in the price of petroleum products has resulted from such emergency situation; and (c) such price increase is likely to cause a major adverse impact on the national economy."

Since 1977, the SPR has received crude oil, reaching its peak of 726.6 million barrels in 2010 as shown in Graph 1.

Graph 1 – SPR Inventory Levels 1977-2021


Since 2015, Congress has been selling the oil in the reserve to fund the deficit, in unpublicized sales. The U.S. Department of Energy has run at least seven sales since 2017, selling 132 million barrels, or about 18.2% of what had been in the reserve.

According to legislation already in place, the amount of oil in the reserve could fall to as little as 238 million barrels by 2028. This will be a 67% reduction to the oil in the reservoir since 2010. This drawdown of crude oil reserves will expose the U.S. vulnerability during a future incident of supply disruptions, rather than higher prices.

On March 19, 2020, President Donald Trump directed the Department of Energy to fill the Strategic Petroleum Reserve to maximum capacity. This directive was given to help support domestic oil producers given the impending economic collapse from COVID-19 and the extreme drop in oil prices in international oil markets.

Reasons for SPR Emergency Releases:

  • 1991 Operation Desert Storm
  • 2005 Hurricane Katrina
  • 2011 IEA Coordinated Release – Libya Arab Spring
  • 2022 High Oil Prices

There have been 5 major withdrawals or releases of crude from the SPR: 1) January 1991, 2) August 2005, 3) June 2011, 4) 1 March 2022, and 5) 31 March 2022. The last release of 180 million barrels is 50% larger than the 4 prior releases combined, of 123.75 million barrels.

The withdrawals can be classified into 2 major areas: 1) war, hurricane, political instability within crude exporting nations impacting reliability of supply, and 2) high crude prices in a volatile market, and are shown in Graph 2.

Graph 2 – SPR Withdrawals


The first withdrawal in 1991, at the beginning of Operation Desert Storm, the United States joined its allies in assuring the adequacy of global oil supplies when war broke out in the Persian Gulf as an emergency sale of SPR crude oil was announced the day the war began. 

In wrapping up the first-ever emergency drawdown of the SPR, Energy Secretary Watkins said, "We have sent an important message to the American people that their $20 billion investment in an emergency supply of crude oil has produced a system that can respond rapidly and effectively to the threat of an energy disruption."

The second withdrawal was in September 2005 after Hurricane Katrina devastated the oil production, distribution, and refining industries in the Gulf regions of Louisiana and Mississippi. Hurricane Katrina's impact was so great, in fact, that SPR emergency oil loans preceded the President's decision to drawdown and sell oil from the Reserve.  The first of several emergency loan requests from refiners was received and approved within 24 hours of Hurricane Katrina making landfall. 

During Katrina, all Gulf of Mexico production, which equated to about 25 percent of domestic production at that time, was shut in initially.  In addition, import terminals were closed; some pipelines and several refineries were inoperable. This was a valid crisis from a severe weather condition.

Because of these disruptions, on September 2, 2005, President George W. Bush issued a Finding of a Severe Energy Supply Interruption as defined in section 161(d) of the Energy Policy and Conservation Act (EPCA), 42 U.S.C. 6 241(d). 

The third withdrawal was in June 2011 when the United States and its partners in the International Energy Agency announced the release of 60 million barrels in response to crude oil supply disruptions in Libya and other countries.  The U.S. obligation was 30 million barrels, and 30.6 million barrels was delivered by August 2011.

The SPR Withdrawal Non-Event of 2008:

There is a lesson to be learned from the SPR Withdrawal Non-Event of 2008 as the President elected to make a crude withdrawal. With the exception of supply uncertainties caused by Hurricanes Gustav and Ike, high prices were not associated with shortages, but with significantly higher prices for crude that reflected international anxiety about the sufficiency of supply in the future.

Though some policymakers urged the Bush Administration to release crude from the SPR, a drawdown would have been unlikely to significantly affect price. High prices were softened when slumping demand in the face of those prices, and pessimistic economic forecasts, triggered a plummeting in the price of crude oil that was eventually reflected in product prices.

Historical Crude Oil Prices Over The Last 70 Years:

Graph 3 shows the price history of West Texas Intermediate (WTI) crude oil from 1946 to present and is adjusted for inflation. The current price of WTI crude oil as of March 31, 2022 was $100.28 per barrel.

Graph 3 – SPR Major Drawdowns & WTI Inflation-Adjusted Price, $/bbl.



From the above graph, the drawdowns have occurred not solely due to high crude prices, but moreover due to a serious interruption in crude supply from catastrophic events such as war directly impacting the U.S. crude supply and hurricanes.

There have been numerous incidences of high crude oil prices that did not warrant the withdrawal of crude from the SPR, followed by the oil price adjusted for inflation as shown below:

  • March 1980 - $134.60
  • October 1990 - $74.86
  • July 2006 - $103.71
  • January 2008 - $ 181.58
  • March 2011 - $135.53
  • March 2012 - $127.44
  • July 2013 - $127.61

On November 23, 2021, as the price for West Texas Intermediate (WTI) crude hit $78.50 per barrel, President Joe Biden issued an order to the U.S. Department of Energy (DOE) to release 50 million barrels of oil from America’s  SPR.

If releasing SPR crude was to serve as a global crude oil price inhibitor, why did the price of crude in February 2022 climb to $95.72? This illustrates the “no-impact” of a crude price-related SPR release. It begs the question, why aren’t we releasing SPR crude solely when there are potential disruptions in the physical supply of crude or refined fuels?


The key points relating to the SPR operation:

  • SPR should remain a crude supply alternative for the U.S. only when crude oil supply to U.S refineries is at risk
  • There is significant evidence that SPR crude releases do not greatly reduce crude oil prices on a global scale in the medium-term
  • The more the U.S. government delivers government oil into the marketplace to hopefully dampen prices, the less incentive oil and gas companies have to produce more products the American economy needs
  • Copyright © May 2022 Ronald L. Miller All Rights Reserved



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