What is the Strategic Petroleum Reserve?
A weekend attack on major oil facilities in Saudi Arabia that cut the kingdom's output in half prompted President Donald Trump on Sunday to say he is prepared to tap the Strategic Petroleum Reserve "if needed" to keep energy prices and crude supplies stable. But what is the Strategic Petroleum Reserve, and would tapping it prevent a spike in U.S. gasoline prices?
It's stockpiled deep in underground caverns
America began setting aside emergency reserves of crude oil, the largest in the world, after the 1973 oil embargo by Arab members of the Organization of Petroleum Exporting Countries, or OPEC, triggered an oil crisis and sent the U.S. economy into recession. President Gerald Ford signed legislation in 1975 to establish a strategic reserve that would hold up to 1 billion barrels of oil to mitigate the damage from any future shortages in global supply.
The Strategic Petroleum Reserve currently has about 645 million barrels of crude stored deep across four underground caverns created in salt domes along the Texas and Louisiana Gulf Coasts. Maintained by the Department of Energy, the caverns can hold up to 727 million barrels of crude. The stockpile is sufficient to cover "the equivalent of 143 days of import protection."
It has been tapped three times in 44 years
The U.S. has drawn on the Strategic Petroleum Reserve just three times, most recently in 2011 when it withdrew roughly 31 billion barrels of oil amid concerns by the Obama administration that a civil war in Libya would disrupt crude supplies. Tapping the reserves to hold down oil and gas prices was also critical for Detroit automakers General Motors and Chrysler, which at the time were just emerging from bankruptcy following the recession.
The U.S. also tapped the reserve for 21 million barrels during the 1991 Gulf War and in 2005 withdrew about 21 million barrels following Hurricane Katrina.
It can deliver up to 4.4 million barrels per day for 90 days
The Saturday attack disrupts an estimated 5.7 million barrels of oil per day — a little more 5% of the world's daily supply — and caused oil prices to surge nearly 20% on Monday.
If Mr. Trump orders an emergency sale from the strategic reserve, it will take 13 days for the U.S. Energy Department to deliver oil to the market. Under the law, the reserve can pump a maximum of 4.4 million barrels per day for up to 90 days. If the crisis is determined to be less severe, the maximum drawdown is limited to a total of 30 million barrels for no more than 60 days.
"It does soften the blow on motorists, but it doesn't easily replace the 5 million barrels per day lost in Saudi Arabia," GasBuddy petroleum expert Patrick DeHaan said.
Ultimately, the U.S. may not need to tap into its special reserves as Saudi Arabia has pledged its stockpiles would keep global markets supplied as the kingdom scrambles to repair damage at its Abqaiq facility and Khurais oil field. How long the rise in oil prices lasts will depend on how long it takes to restore Saudi production.
But even if the U.S. does need to access the reserve, the impact on gas prices would likely be minor. That's because it would take about two weeks to deliver the additional oil to market. States like California, which is out of reach for the pipeline from the reserves in Louisiana and Texas, wouldn't receive emergency oil.
DeHaan told CBS MoneyWatch the attack on Saudi Arabia is likely to drive the average cost of a gallon of gas in the U.S. up 10 cents to 25 cents, though it's likely take up to two weeks for the effect to be fully passed along.