U.S. Oil Reserve Created for Supply Disruptions, Not Strictly Military Use

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Quick Take

The U.S. Strategic Petroleum Reserve was set up as an emergency source of oil to keep supplies flowing in the event of unexpected disruptions. It’s not just designed “for when we get attacked and need the fuel to keep our Air Force in the air,” as social media posts falsely claim.


Full Story

President Joe Biden announced on Nov. 23 that the Department of Energy would release 50 million barrels of oil from the Strategic Petroleum Reserve, or SPR, “to lower prices for Americans and address the mismatch between demand exiting the pandemic and supply.” 

Responding to Biden’s action, conservative commentator Jesse Kelly falsely claimed in a tweet that same day that the SPR was intended strictly for military purposes, not to meet market demand.

“PRO TIP: The strategic oil reserve is for when we get attacked and need the fuel to keep our Air Force in the air,” the tweet, which was shared widely on Facebook, read. “It’s so your cities and towns don’t get bombed into powder. With you and your family in them. It’s not for when you get some bad poll numbers about high gas prices.”

Though the reserve was established with national security in mind, it wasn’t envisioned for use only in the event of war. Under consideration since the 1940s, the SPR was established in response to energy shortages created by the 1973-74 oil embargo. Then-President Gerald Ford signed the Energy Policy and Conservation Act, or EPCA, in 1975, which declared U.S. policy to build a reserve of up to one billion barrels of petroleum. 

The oil in the reserve — currently about 600 million gallons — is housed in four salt caverns in Texas and Louisiana.

Reducing the Burden on Consumers

The president may authorize a drawdown from the reserve in response to a “severe energy supply interruption,” the EPCA states. The “interruption” may be a supply shortage which the president determines is “of significant scope and duration, and of an emergency nature; may cause major adverse impact on national safety or the national economy; and results, or is likely to result, from an interruption in the supply of imported petroleum products, or from sabotage or an act of God.”

Since 1975, the reserve has been tapped by both Republican and Democratic administrations to alleviate potential shortages from unexpected disasters, such as hurricanes. In 2000, the Clinton administration authorized the release of 30 million barrels in response to a rise in home heating oil prices.

The Department of Energy, which maintains the reserve, posts information about previous sales and releases on its website.

The Biden administration’s announcement that it would release 50 million barrels from the reserve was made in tandem with similar announcements from India, Japan, South Korea and the U.K. China also authorized the release of additional oil into the market.

The International Energy Agency noted the announcement, saying, “We recognize that the rise in oil prices is placing a burden on consumers and has added to inflationary pressures during a period when the economic recovery remains uneven and faces a range of risks.”

“In this context, we respect the assessments and decisions made by individual IEA member and partner countries on how best to respond to the specific challenges and circumstances they each face,” said the IEA, an intergovernmental organization that works with countries on energy security.

Countries have coordinated oil-reserve releases three times in the past, according to the IEA: ahead of the Gulf War in 1991; after Hurricanes Katrina and Rita damaged oil infrastructure in the Gulf of Mexico in 2005; and when supplies were disrupted in 2011 due to the Libyan Civil War.

The IEA’s website also notes that the release of oil reserves can help calm markets. “Even when stock releases do not occur during severe market events, the availability of IEA emergency stocks can help prevent panic reactions by market participants and reduce economic damage,” according to the organization.

Release of Oil Reserve May Have Limited Effect

The idea that tapping strategic reserves will lower prices may work in theory, but the amounts the U.S. and its partners have in mind isn’t enough to make a significant difference, said Greg Upton, associate professor at Louisiana State University Center for Energy Studies.

“I don’t think the amount of oil that was announced to be released is really going to have a material effect on prices for consumers,” Upton told FactCheck.org in a phone interview on Nov. 29. The total amount released by the U.S., India, China and South Korea represents “about 12 hours of global consumption,” he said. “It’s just not really enough to move the needle.”

Oil prices, he noted, were relatively unchanged the day after the White House announcement.

The SPR “was meant to be a kind of energy insurance policy,” Upton said. “It was really set up for energy security and supply disruptions” rather than to influence energy prices, he said.

But it wasn’t set up solely for military purposes either, Upton said, noting that current inventory only equals about 54 days of U.S. production. National security, he said, “doesn’t mean just for war.”

Congress, under budget legislation, previously mandated the sale of 18 million barrels of reserve oil, and that amount is included in the 50 million barrels the Biden administration is releasing. The remaining 32 million barrels will go up for auction.

But since oil prices have declined and there are fees attached, there might not be many takers, said Troy Vincent, senior market analyst at the data analytics company DTN. Buyers in that so-called exchange solicitation have to return the amount of oil they take, along with a premium, during fiscal years 2022, 2023 and 2024, according to the Energy Department.

“As oil prices drop, the less incentive a commercial entity has to take that oil from the government and try to make a profit,” Vincent said in phone interview with FactCheck.org on Dec. 2. “The market is telling them there isn’t a demand for that.”

U.S. gasoline prices fell in the last three weeks of November, according to the U.S. Energy Information Administration. Yet the national average price of regular gasoline in the week ending Nov. 29 was about the same as a month earlier and $1.26 a gallon higher than a year earlier, EIA data show.

The recent price drop in oil wasn’t a direct response to any government action, Vincent said. The White House announcement was “another straw on the camel’s back,” on top of news of the emerging omicron variant of the coronavirus and other world events driving down oil prices, he said.

In addition, the government is “slowly drawing down the inventory that’s in the SPR on purpose,” Vincent said. Because the U.S. has been producing more oil over the past decade, imports are much lower and there’s not the need to keep as much in storage, he said.

“That’s another reason [the release is] not seen as some great strategic threat to our military or economic resiliency,” Vincent said. “We don’t have to net import as much anymore because we produce so much domestically.”

Editor’s note: FactCheck.org is one of several organizations working with Facebook to debunk misinformation shared on social media. Our previous stories can be found here.

Sources

White House. “President Biden Announces Release from the Strategic Petroleum Reserve As Part of Ongoing Efforts to Lower Prices and Address Lack of Supply Around the World.” Press release. 23 Nov 2021.

U.S. Department of Energy website. Strategic Petroleum Reserve, Origins.

U.S. Congress website. Energy Policy and Conservation Act.

Stevenson, Richard and Neela Banerjee. “Clinton Approves Releasing Some Oil From U.S. Reserve.” New York Times. 23 Sept 2000.

Greg Upton. Associate professor-research, Louisiana State University Center for Energy Studies. Phone interview with FactCheck.org. 29 Nov 2021.

Troy Vincent. Senior market analyst, DTN. Phone interview with FactCheck.org. 2 Dec 2021.

International Energy Agency. Press release, “IEA statement on US announcement of oil release.” 23 Nov 2021.

International Energy Agency. “The global oil market remains vulnerable to a wide range of risk factors.” Webpage updated 27 Nov 2019.

Azeez, Wale. “China is Joining the U.S. and Other Countries in Tapping Emergency Oil Reserves.” CNN Business. 24 Nov 2021.

U.S. Energy Information Administration. “Weekly U.S. Regular All Formulations Retail Gasoline Prices (Dollars per Gallon).” Accessed 3 Dec 2021.

U.S. Department of Energy. Office of Fossil Energy and Carbon Management. “Summary of 50 Million Barrel Release from the Strategic Petroleum Reserve.” 23 Nov 2021.

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