Is It Time To Sell Off Our Strategic Oil Reserves?
House lawmakers sent a letter to government auditors asking them to examine “cost-effective” alternatives to the Strategic Petroleum Reserve (SPR) that was created in 1975 to protect the U.S. from oil supply shocks.
Hydraulic fracturing has changed the U.S. energy landscape, increasing oil production to levels not seen in decades. The U.S. is now the world’s largest liquid fuels producer, which has some lawmakers questioning the need for stockpiling up to 727 million barrels of oil.
“Given the significant federal investment in the SPR,” top lawmakers on the House Committee on Energy and Commerce asked the Government Accountability Office (GAO) to “undertake an assessment of the SPR and identify options to more efficiently and cost-effectively meet U.S. energy security needs and comply with international obligations.”
Congress recently appropriated $375 million to modernize the SPR. The Energy Department maintains several man-made caverns in Louisiana and Texas that currently hold about 700 million barrels of oil.
Congress has approved $2 billion to improve the SPR, but now lawmakers wonder if there are cheaper ways to provide the U.S. with oil during emergencies. Lawmakers also wonder if the SPR can even react to oil market shifts.
“These findings suggest that the SPR may have difficulty meeting its energy security mission,” lawmakers wrote to GAO.
The SPR was created in response to the Arab oil embargos during the 1970s. At that time, U.S. oil production was 8.8 million barrels per day mostly from Alaska, but that fell over the following decades to just 5 million barrels per day in 2008.
As production fell and oil prices spiked, U.S. lawmakers on both sides of the aisle championed “energy independence.” Fracking for shale oil reversed that trend. Recent attempts to use the SPR to offset oil price spikes have had little effect on markets.
Nowadays, lawmakers tried using the SPR to pay for various government programs. Congress’ latest bill to fund the government called for selling off $375.4 million worth of oil from the Department of Energy’s Strategic Petroleum Reserve to, in part, fund a $45 million plan to pay the health care costs for about 12,500 retired coal miners through April.
The U.S. is obligated to stockpile 90 days worth of oil imports because of its membership in the International Energy Agency.
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