The US Strategic Petroleum Reserve (SPR) was created in 1975 following the Arab oil embargo of 1973-74 to reduce the effects of supply disruption. The SPR is administered by the Department of Energy. It is the largest emergency supply in the world with a capacity for 714 million barrels. The SPR is crude, not refined product, but the facilities in Texas and Louisiana are located near the major petrochemical and refining processing sites. With the current policy of reduction in US self-produced energy, the SPR has again increased in importance.
The SPR has been used as resource to counter current increases to the US cost of fuel due to inflation, to limited effect. Quantities have been sold overseas to US allies in Europe, but also to China! The Wall Street Journal reported that, "The SPR declined by nearly 7 million barrels in the week ended September 16, leaving it at roughly 427 million barrels - the lowest since 1984. For the first time since 1983, the SPR now holds less than commercial storage."
Yesterday, four weeks before the US mid-term elections, in a rebuff to President Biden's wishes, the Organization of Petroleum Exporting Countries plus (OPEC including non-member allies) (OPEC+) decided to reduce global production by 2 million bpd. This will cause a global increase in price. OPEC+ said the decision was based on "uncertainty that surrounds the global economic and oil market outlooks." Biden quickly followed this decision with an announcement that he was authorizing a further release of 10 million barrels from the SPR.
Current, and potential international issues, pose threats of oil-shock including supply disruption, demand and higher prices. Factors include: an increase in intensity and/or geographic spread of the conflict in Ukraine caused by Russia, conflict arising from the Iran nuclear issue, conflict caused by China invading Taiwan etc, Indeed, this could self-exacerbated by the US imposing sanctions on any of the parties involved above.
The SPR is also important in respect of a US national emergency caused by natural disaster.
Despite current "green" policies, if the SPR is not quickly replenished and maintained it is a serious national security and economic error for the US.
*** For your kind consideration, I would appreciate any support with my cancer expenses: https://gofund.me/e5992c63.
No comments:
Post a Comment