President Biden announced Thursday that his administration will release 180 million barrels of oil from the nation's Strategic Petroleum Reserve over the next six months in a move to curb soaring gasoline prices.
That amounts to 1 million additional barrels per day — which the White House said is the biggest oil release in U.S. history — and is the third time Mr. Biden has tapped the petroleum stash during his presidency. In November 2021 he ordered the release of 50 million barrels, while in March the U.S. joined 30 other countries that are members of the International Energy Agency to release 60 million barrels, including half from the U.S.
White House officials said the latest move to tap the oil reserve is part of a larger plan to help lower gas prices, which now average $4.22 a gallon. For anyone wondering exactly what the Strategic Petroleum Reserve (SPR) is, here's an explainer.
What is the Strategic Petroleum Reserve?
The SPR is a collection of 60 underground salt caverns where millions of gallons of crude oil are stored in barrels. Known as the largest supply of emergency crude oil in the world, the federally owned facilities are managed by the U.S. Department of Energy. Whoever is the current U.S. president can decide to tap the reserve, but only under a set list of parameters.
Where is the reserve located?
The massive underground salt caverns used to store the nation's reserve oil are found at four different sites along the coastlines of Louisiana and Texas. The Bryan Mound site is just outside of Freeport, Texas. The Big Hill site is some 26 miles outside of Beaumont, Texas. The West Hackberry site is about half an hour from Lake Charles, Louisiana, and the Bayou Choctaw site is roughly 10 minutes away from Baton Rouge, Louisiana.
How big is the reserve?
The four sites vary in size and together can hold 714 million barrels of crude, according to the Energy Department. Bryan Mound, the largest of the four, is a 500-acre location with 19 storage caverns that can hold roughly 230 million barrels. Big Hill is 271 acres, with 14 storage caverns and an inventory of 143.7 million barrels. Bayou Choctaw, on 356 acres, has six storage caverns and a capacity of 71.9 million barrels. West Hackberry is 405 acres with 21 storage caverns that can hold 192.3 million barrels.
When was the SPR created?
The reserve was created in December 1975, when then President Gerald Ford signed the Energy Policy and Conservation Act. In 1944, then-Secretary of the Interior Harold Ickes introduced the idea of storing oil reserves in case of an emergency. The idea sat dormant for decades until 1973, when the Organization of Petroleum Exporting Countries (OPEC) started an oil embargo that inflicted enormous economic harm on the U.S. economy. That led policymakers to revisit Ickes' proposal.
What is the reserve used for?
Having a massive supply of crude oil ready to deploy helps keep the price of gasoline or the price of home heating oil somewhat predictable and stable for U.S. consumers. When the U.S. decides to pull barrels of crude oil from the reserve, it is known as an emergency drawdown or release. During a drawdown, the U.S. selects an amount of crude oil to sell, then auctions it off to the highest bidder — typically an oil company.
How has the reserve oil been used in the past?
Drawdowns of the SPR have been relatively rare in its 45-year history. Before Mr. Biden tapped the reserve in 2021 and this year, previous American presidents had ordered just three emergency drawdowns, according the the Energy Department.
In 1991, for example, President George H. W. Bush ordered a drawdown of 33.7 million barrels soon after Operation Desert Storm began in an effort to minimize the war's effect on oil markets. George W. Bush pulled out 30 million barrels in 2005 after Hurricane Katrina pummeled the Gulf Coast. The Obama administration also released 30 million barrels in 2011, when the war in Libya reduced that country's oil production.
It's more common for the government to release oil under exchange agreements, which effectively act like a loan. More than a dozen such exchanges have taken place, usually after hurricanes. In 2000, former President Bill Clinton released 30 million barrels to combat a rise in heating oil prices — a move that was criticized at the time as a political ploy to help his vice president, Al Gore, who was running for president.
The government has also released oil in non-emergency situations, such as to raise money or plug a budget deficit.
Does tapping the SPR really lower prices at the pump?
The short answer is yes — but not by much, and only temporarily. That's because domestic gas prices are tied far more closely to the global cost of oil.
SPR releases have historically had a minor impact on fuel prices, and that effect usually lasts only two or three weeks, according to Clayton Allen, director for the United States at political risk research firm Eurasia Group.
"SPR releases have a price impact, yes, but it's not a huge price impact," Allen said. "If you're concerned about gas being $5 a gallon, an SPR release won't pull gas back to $3.50, but it will prevent the oil market from seizing up like it did in the 1970s."
A 2017 Congressional Research Service report also found that raiding the SPR has only a modest impact on what Americans pay for gas. On June 23, 2011, for example President Obama announced a 30 million barrel release at a time the average U.S. gas price was $3.60 a gallon.
"The price of gasoline declined by about 2% over the next two weeks following the SPR release announcement, but by July 8, 2011, the price had again reached $3.61 per gallon, approximately the same level as before the release," according to the report.