Posts Tagged ‘SPR’

Jennifer Granholm

Energy Secretary Jennifer Granholm last month said it would be difficult for the U.S. to take advantage of low oil prices to replenish the Strategic Petroleum Reserve because of maintenance at two of the four sites.

The Financial Times reported, citing people familiar with Saudi Arabia’s thinking, that Riyadh was “irritated” by that comment. In any case, it came on top of stress in the financial sector that had dragged oil prices as low as $64 in March.

Market Watch

As previously posted, the SPR is easier to drain than fill. The reserve is still flat-lined at 371.6 million barrels or about half full.

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For the first time since May 18, 1984, when the SPR was being filled, the reserve has fallen below 400 million barrels.

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The SPR withdrawals are scheduled to end just prior to the mid-term elections. What happens if oil markets tighten further, perhaps with OPEC assistance?

Remember that the SPR was intended to diminish the vulnerability of the United States to the effects of a severe energy supply interruption!

Updated SPR “milestones”

  • Largest-ever one year decline – 168.2 million bbl or 24.4% (8/13/2020 to 8/19/2022)
  • 37.7% decline since 2010
  • 72 consecutive weeks of decline – 4/9/2021 to 8/19/2022
  • 47 million bbls below the important 500 million barrel threshold which had never before been breached on the downside
  • Lowest inventory since 1/11/1985
Above numbers are end of year volumes except for 2022 which is as of 8/19

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  1. …that the SPR legislation authorized the sale of large volumes of oil for the purpose of easing worldwide prices. Per section 151 of the statute, which was passed following the oil embargoes in the 1970’s, the SPR was intended to diminish the vulnerability of the United States to the effects of a severe energy supply interruption.
  2. …that SPR oil could be sold to all entities including Chinese companies that are also buying oil from Russia, the country being boycotted. How absurd is that? (The confirmation of one such transaction is pasted below.)
  3. …that increased worldwide emissions from the consumption of SPR oil are okay, but emissions from the consumption of our offshore oil and gas are not. Remember that Lease Sale 257 was vacated because BOEM did not analyze the effect that lower prices (from increased US production) would have on GHG emissions. Why are EarthJustice et al silent on the SPR sales? Where is DOE’s environmental assessment of these sales?

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The SPR is down to 480.1 million barrels as of 7/15/2022. For prior years, the figures are year-end. See previous SPR post.

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DOE update as of 6/24/2022

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As of June, 2022
Bloomberg projection

Meanwhile, no new leases have been issued in Federal waters immediately offshore from the SPR sites (see map below) for 580 days, the longest leasing gap since 1958.

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SPR stocks are down 29% from the end of 2010 and 19% from the end of 2020. Continued declines of this magnitude would be a major concern. Should a major crisis arise, offshore production takes years to ramp up, especially given that the lease inventory is at historic low levels and exploration has thus been stymied. Shale producers can respond more quickly to market needs, but transportation bottlenecks, and staffing and equipment availability can limit near-term production growth.

As was noted here in April, the inconsistency of drawing heavily on the SPR while constraining leasing in the adjacent offshore waters is striking. Apparently, there is nothing to worry about because neither the Department of the Interior nor the Department of Energy home pages even mention the words oil or gas. This is pretty remarkable given their broad responsibilities for these vital resources, and the crippling effects of shortages and high prices.

SPR locations

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