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Page added on January 11, 2015
Strategic Petroleum Reserve needs ‘modernization’
Rapid changes in the location and type of oil production inside the United States require a “modernization” in the way the country stockpiles crude for emergencies, Energy Secretary Ernest Moniz said Wednesday.
More specific recommendations about the Strategic Petroleum Reserve — 691 million barrels of oil stashed in underground salt caverns in Louisiana and Texas — will come when the Obama administration releases the first phase of its quadrennial energy review later this month, Moniz said during a presentation at The Woodrow Wilson International Center for Scholars. That broad multi-year analysis will focus first on energy infrastructure and is meant to provide a road map for federal energy policy, executive actions and government-sponsored research programs.
Moniz suggested that the current approach to the strategic petroleum reserve — established in 1975 in the wake of the OPEC oil embargo — doesn’t mesh with today’s booming domestic production, and the surge in light, sweet crude being pulled out of wells in North Dakota, West Texas and other parts of the country.
“Our petroleum reserve really needs modernization, certainly in a variety of physical elements and partly because of the changed production profile in the United States,” Moniz said. “The different geography of producing oil and gas has led to a number of distribution issues that we partially uncovered by doing a test sale from the petroleum reserve (last) year.”
As part of the quadrennial energy review, Moniz said the administration will be laying out plans for addressing the reserve and its “distributional capabilities.”
Some policymakers have already suggested that it’s time to shrink the size of the Strategic Petroleum Reserve to better match United States’ lower demand for imported oil. Net oil imports — imports minus exports — have declined from a peak of 60 percent of consumption in 2005 to about 30 percent in the first half of 2014, according to a report from the Government Accountability Office.
The United States is obligated to maintain a reserve of crude oil or production products equivalent to at least 90 days worth of net imports, as part of the country’s membership in the International Energy Agency. The United States is well above that threshold now.
One benefit of the current location is its proximity to the heart of the nation’s refining capacity, with facilities all along the Gulf Coast.
But the makeup of the emergency crude stockpile may not be a perfect match with the U.S. refinery system, since some domestic refineries process heavier crudes than those stored in the reserve.
The Government Accountability Office warned in 2006 that in an emergency, refineries configured to use heavy crude would not be able to efficiently the oil stashed away in the Strategic Petroleum Reserve and would likely pare production of some petroleum products. That could spur increases in prices for heavy crude products, blunting the ability of the U.S. to use the reserve as a weapon against economic damage amid disrupted oil supplies.
But the Energy Department previously has said storing heavy crude in the reserve would curb the ability of the reserve to be used in response to a disruption in lighter oils.
Storing more heavy crude also would require infrastructure improvements, including upgrades to a tanker delivery location known as the Sun Terminal and an additional pipeline from one of the four reserve storage sites.
In response to a Government Accountability Office probe last year, the Energy Department said it was reviewing the optimal configuration and capabilities of the petroleum reserve, as well as what is required to maintain its long-term sustainability.
4 Comments on "Strategic Petroleum Reserve needs ‘modernization’"
Go Speed Racer on Sun, 11th Jan 2015 7:10 am
Kool. Somebody set a rule that to be a member of the International Energy Agency, you have to keep a 90 day reserve supply of oil for your country. So if oil supply is interrupted, you have 90 days remaining, before nobody has any oil anymore.
90 days is obviously the right number. Not 80 days, and not 120 days. Has to be 90. LOL. And in the accidental event you have too much reserve oil (more than 90 days) its important to reduce your reserve so that the country will run out of oil in exactly 90 days.
I am glad a rule was setup, so that we know the right number for how quickly to run out of oil. Its 90.
penury on Sun, 11th Jan 2015 11:10 am
Let me see if I understand the situation. The petroleum reserve is primarily heavy crude. The refineries are primarily(?) configured to process light crude. The emergency that we are prepared for must not exceed 90 days. Sounds like a plan to me. Almost as good as the safe storage of spent nuclear fuel. It reminds me of several .gov programs I have been aware of over the years.
rockman on Sun, 11th Jan 2015 1:42 pm
First: “Moniz suggested that the current approach to the strategic petroleum reserve — established in 1975 in the wake of the OPEC oil embargo — doesn’t mesh with today’s booming domestic production, and the surge in light, sweet crude being pulled out of wells in North Dakota, West Texas and other parts of the country.” IMHO one of the most foolish and shortsighted comments to come out of DC in a long time. So the logic is that we’ll still have a “surge in light sweet crude in 10+ years when even the experts today can’t make a confident how the drop in oil prices will effect shale production a year+ out.
Second: “But the makeup of the emergency crude stockpile may not be a perfect match with the U.S. refinery system, since some domestic refineries process heavier crudes than those stored in the reserve.”. An absolute piece of self-serving gov’t bullish*t IMHO. From another source but from the same gov’t: “More then 60% of the oil stored in the SPR is the heavy variety the nearby Gulf Coast refineries are designed to process.” And again from the same gov’t:”…while much of the oil we still import is heavy and sour (higher sulfur), to match the requirements of current refinery configurations.” Which means that for more then half the period of an emergency we have the right oil at the right place at the right time. And more then enough time to ship the lighter oil to other refiners if we anticipate the need for it.
And much of the surge in N American production is already going to east and west coast refineries. Rail shipments of oil to CA refineries is are record levels and are anticipated to increase. And east coast refineries in both the US and Canada have been revitalized thanks to the surge.
And lastly the US refineries are currently exporting the products made from 3 million bopd. If the US lost about half of its current oil imports it could immediately replace them by outbidding the foreign buyers for that production. A feat the US has always achieved in the past while pissing many of the world’s poorer economies in the process.
I take this propaganda as a prelude to selling SPR reserves to produce a net income for the gov’t by replacing it with cheaper light oil. And in the process putting more light oil in Gulf Coast where, by the govt’s own admission, local refiners are not as well designed to handle it.
Unfortunate the general public is so poorly educated in such matters they would never understand the counterargument IMHO.
Go Speed Racer on Sun, 11th Jan 2015 5:12 pm
Its about some fat cat in a big fat suit flying along in the back of a Lear Jet. And that fat cat has figured out how to sell off the national strategic petroleum reserve, and keep the proceeds for himself. And he is going ‘har har har har’ while he counts up more money than he could ever spend in 4000 lifetimes.
And all the Republicans said “Amen”.