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Oil Fact Sheets
Role of the Strategic Petroleum Reserve
The Strategic Petroleum Reserve (SPR) is the nation's first line of defense against an interruption in petroleum supplies. The U.S. government's commitment to withdraw petroleum from the SPR early in a potential supply emergency makes the 570 million-barrel reserve a significant deterrent to petroleum import cutoffs and a key tool of U.S. foreign policy.
Market driven price increases for petroleum and petroleum products have recently led some lawmakers and consumer groups to call for the sale of petroleum from the SPR to lower prices. IPAA strongly opposes all non-emergency sales of crude oil from the SPR aimed at manipulating prices.
The SPR was created to deal with supply disruptions, not high prices. Interference in the petroleum market is counterproductive to natural adjustments in the marketplace, and is particularly harmful to America’s independent producers. Because they operate in the upstream, independent producers are more susceptible to shifts in the commodity market prices of petroleum.
Each day nearly 19 million barrels of petroleum are used throughout the U.S., principally as transportation fuels. This constitutes nearly 30 percent of daily world production. With increasing U.S. consumption, petroleum imports have likewise increased significantly. Currently, the U.S. depends on imports to meet 56 percent of its petroleum requirements, and this dependence is expected to increase to over 62 percent by the year 2010.
Two thirds of the petroleum entering the world market is from historically unstable countries in the Middle East and Africa. During a petroleum supply disruption, however, conventional supply patterns may be disrupted. As a result, with its high level of import dependence, the U.S. is potentially at considerable risk from supply disruptions in any part of the world.
If petroleum were sold from the SPR each time fuel prices rose, we would reduce our ability to address a situation with the potential to seriously injure the U.S. economy. In addition, a drawdown of the reserve might not have the desired result. Consider this summer’s high gasoline prices. Prices have risen because increased demand has outpaced supplies of gasoline. A drawdown of petroleum from the SPR would not have the intended impact on gasoline prices because it would take weeks to release the petroleum from the reserve, refine it into gasoline and deliver it to market. In addition, refineries are already operating at peak capacity (96 percent), and are not able to increase production of gasoline.
With more than two thirds of petroleum exports to the world market being supplied from politically volatile countries, the existence of the SPR is more important now than ever. Any sale of petroleum from the SPR when supplies are adequate to meet domestic needs could easily undermine the petroleum markets and drive the domestic industry, especially independent producers, back into economic turmoil.
IPAA urges policy makers to oppose all non-emergency sales of SPR stockpiles to manipulate petroleum markets, and to support polices that will strengthen not only the SPR but American’s true "strategic petroleum reserve"—independent petroleum producers.
August 2000
