Anoint my caverns with oil
SIXTY CAVERNS extend deep into the subterranean salt that composes the substrate along much of America’s Gulf Coast, at four sites, two each in Texas and Louisiana. They are huge; the typical cavern can hold two Empire State Buildings stacked atop each other. These caverns hold America’s Strategic Petroleum Reserve (SPR), the world’s largest stockpile of crude oil. All told they can hold 714m barrels, but today, after the largest-ever drawdown last year to stabilise oil markets in the wake of Russia’s invasion of Ukraine, they hold just half that capacity—the SPR’s lowest level in 40 years. On May 15th the Biden administration announced a 3m-barrel purchase for August delivery. But that is just the first step in a long, fraught process.
The SPR was born from crisis. In 1973, Arab members of the Organisation of the Petroleum Exporting Countries imposed an oil embargo on the United States and other Western countries in retaliation for supporting Israel during the Yom Kippur War. Gas prices shot up; fuel was rationed. Two years later, then-president Gerald Ford signed the Energy Policy and Conservation Act, which authorised the creation of a stockpile of up to 1bn barrels of oil. It has never risen quite that high, but at its peak, in December 2009, the SPR held 727m barrels. Pipelines carry oil into the SPR from around the country, and from it to nearby refineries.
The SPR is designed to respond to domestic and international supply disruptions, either through sales or, more frequently, exchanges. The former is straightforward: by either presidential or congressional directive, oil is sold at competitive auctions to the highest bidder. Big oil firms often use the latter. Much of America’s refining capacity sits on America’s natural-disaster prone Gulf Coast; when hurricanes halt or impede production, oil majors can request loans from the SPR, which they sometimes repay at a premium.
2023-05-18 07:47:34
Link from www.economist.com
