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What is the Strategic Petroleum Reserve?

With oil prices rising, the U.S. government has decided to tap into its Strategic Petroleum Reserve to help make sure that people who use oil to heat their homes will have plenty and that the price will not be too high. President Clinton authorized the Department of Energy, which manages the reserve, to release up to 30 million barrels of oil in a swap with oil companies. The companies will take the oil in fall 2000 but will have to return the oil by fall 2001. The government hopes that the companies will use the oil to keep supplies adequate this winter.

The Strategic Petroleum Reserve is the United States' emergency oil stockpile, and it is the largest emergency petroleum supply in the world. The reserve stores about 570 million barrels of crude oil in underground salt caverns at four sites along the Gulf of Mexico. A barrel contains 42 gallons or 159 liters of oil. To create the caverns, workers drill into a salt dome and then put water into the hole to dissolve the salt. Each cavern is about 2,000 feet deep and holds about 10 million barrels of oil. The government uses salt caverns because it costs less than storing oil in aboveground tanks and because the pressure from the earth will seal up any leaks that might develop. The Energy Department also says that the temperature difference in the caverns, which are 2,000 feet below the surface of the earth, keeps the oil circulating so that the petroleum maintains its quality.

The government chose to put the oil near the Gulf of Mexico because there are many oil refineries nearby and because shipping is readily available. The sites are Bryan Mound near Freeport, Texas; Big Hill near Winnie, Texas; West Hackberry near Lake Charles, La.; and Bayou Choctaw near Baton Rouge, La. The reserve could store up to 700 million barrels. Most of the oil in the reserve comes from Mexico and the North Sea.

It costs the federal government $21 million a year to maintain the oil reserve, and about 1,150 people work for the oil reserve. About 125 are government employees, and the rest are contracted workers. In the coming budget year, the Energy Department will get about $157 million to buy oil for the reserve.

The United States started the petroleum reserve in 1975 after oil supplies were cut off during the 1973-74 oil embargo. The embargo was a shock to the U.S. economy, and the government decided that the country should never be caught short again. The United States uses almost 19 million barrels of petroleum every day, and more than half of that oil comes from imports. A reserve of 60 days' worth of petroleum could help keep the oil flowing in case of a cutoff. The last time that the United States used oil from the reserve was during the Persian Gulf War in 1991 to keep oil plentiful and prices stable. That drawdown is different from the exchange authorized recently because the companies who bid for it will return the oil this time.

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