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A Look Inside the Strategic Petroleum Reserve

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OIL SHOCK?
DailyFeed
The US Department of Energy announced today:

"...[T]he U.S. and its partners in the International Energy Agency have decided to release a total of 60 million barrels of oil onto the world market over the next 30 days to offset the disruption in the oil supply caused by unrest in the Middle East. As part of this effort, the U.S. will release 30 million barrels of oil from the Strategic Petroleum Reserve. The SPR is currently at a historically high level with 727 million barrels."

According to the DOE, the Libyan conflict has "caused a loss of roughly 1.5 million barrels of oil per day -- particularly of light, sweet crude -- from global markets. As the United States enters the months of July and August, when demand is typically highest, prices remain significantly higher than they were prior to the start of the unrest in Libya."

Government statistics point out that the maximum "drawdown capability" is 4.4 million barrels per day, which take 13 days from when the President makes his decision to tap the reserves until the supply hits the market.

Here's a look at where the US keeps its emergency oil:

There are a handful of SPR facilities near the Gulf of Mexico, where supplies are stored between 2,000-4,000 feet underground in "self-healing, environmentally-friendly" salt caverns:



Security is, obviously, taken rather seriously...



...as confirmed by the armed guard in a Humvee:



...who ensures these guys won't get distracted.



The United States' SPR is "the largest emergency oil stockpile in the world," according to the DOE, "represent[ing] about $22 billion investment in energy security ($5 billion for facilities and $17 billion for crude oil)."

But, the SPR has only been tapped twice before.

From the DOE website:

A Presidentially-directed release has occurred two times under these conditions. First, 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. An emergency sale of SPR crude oil was announced the day the war began.

The second 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.

In short, there are two reasons a US President would resort to dipping into our nation's emergency oil supply:

Mother Nature:



Motherf---er:

POSITION:  No positions in stocks mentioned.

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