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US announces oil release from Strategic Petroleum Reserve

  • Category
    Economy
  • Published
    1st Dec, 2021

Context

The Biden administration has asked some of the world's largest oil consuming nations - including China, India and Japan - to consider releasing crude stockpiles in a coordinated effort to lower global energy prices.

About

What is Strategic Petroleum Reserve?

  • The Strategic Petroleum Reserve is an emergency stockpile to preserve access to oil in case of natural disasters, national security issues and other events.
  • Maintained by the Energy Department, the reserves are stored in caverns created in salt domes along the Texas and Louisiana Gulf Coasts.
    • The massive 60 underground salt domes or caverns 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 approximately 26 miles outside of Beaumont, Texas
      • The West Hackberry site is about half an hour from Lake Charles, Louisiana
      • The Bayou Choctaw site is about 10 minutes away from Baton Rouge, Louisiana

Origin of SPR

  • The United States created the SPR in 1975 after the Arab oil embargo spiked gasoline prices and damaged the U.S. economy.
  • Presidents have tapped the stockpile to calm oil markets during war or when hurricanes hit oil infrastructure along the U.S. Gulf of Mexico.

Current Capacity of SPR

  • The reserve currently holds about 606 million barrels in dozens of caverns in four heavily guarded locations on the Louisiana and Texas coasts. That's enough oil to meet U.S. demand for more than a month.
  • The country also maintains small heating oil and gasoline reserves in the U.S. Northeast.

Which countries have SPR?

  • Besides the United States, the other 29 member countries in the International Energy Agency, including the United Kingdom, Germany, Japan and Australia, are required to hold oil in emergency reserves equivalent to 90 days of net oil imports. Japan has one of the largest reserves after China and the United States.
  • China, an associate member of the IEA and the world's second-leading oil consumer, created its SPR 15 years ago and held its first oil reserve auction in September.
  • Another IEA associate member, India, the third-biggest oil importer and consumer, also maintains a reserve.
  • Overall, OECD governments held more than 1.5 billion barrels of crude as of September.

Strategic petroleum reserves in India

  • India has three strategic petroleum reserves with combined storage capacity of 5.33 million tonnes (about 38 million barrels), sufficient to meet country’s crude oil requirements for about 9.5 days.
  • The three operational crude oil storage facilities are located in
    • Vishakhapatnam (1.33 million tonnes)
    • Mangalore (1.5 million tonnes)
    • Padur (2.5 million tonnes)
  • These facilities are operated by the State-run Indian Strategic Petroleum Reserve Limited.
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