The Biden-Harris administration recently announced their plan to sell 1 million barrels of oil from the United States’ Northeast Gasoline Supply Reserve (NGSR). They will periodically release barrels between Memorial Day and Independence Day as the summer holiday approaches. They hope that the new supply will help reduce gasoline prices for American consumers as they travel this summer.
This is not the first time the United States has tapped into its oil supply. In 2022, it released a historic 180 million barrels of crude from the national Strategic Petroleum Reserve in response to the Russian invasion of Ukraine. Reduced trading with Russia, which produced 11% of the world’s oil in 2023, caused prices to surge.
Clearly, the supply of petroleum products is vital to the United States and its citizens. But what exactly is the Strategic Petroleum Reserve (SPR)? And why is it so important?
The idea for some sort of oil reserve had been in the air since the 1940s, but a real need for one presented itself during the Yom Kippur War. The United States’ support for Israel led Arab countries to block the flow of oil to the country, leading to a drastic increase in oil prices. President Gerald Ford and Congress then created the SPR through the Energy Policy and Conservation Act on December 22, 1975, to reduce the impact of changes in petroleum supply in the United States on Americans. This system is designed to stabilize the oil market prices, mitigate the effects of foreign events, and provide an emergency supply of crude oil for the nation. It is now the largest supply of emergency crude oil in the world.
The SPR is a national network of refineries and distribution centers along with storage sites. Three of these distribution centers, Seaway, Texoma, and Capline, are located on the Gulf of Mexico, where hundreds of underground salt domes are also present. These salt domes are the perfect place for petroleum storage due to their dry properties, secure space, and inexpensiveness.
The SPR is filled by international purchases of oil. In the past, it also came from “royalty-in-kind” programs where the government would take barrels of oil as royalty instead of cash during oil mining. Oil leaves the SPR on either the president’s or the Secretary of Energy’s order with certain limits to the amount based on the severity of the crisis.
The SPR is a complex machine that helps regulate oil prices for Americans and is necessary for the nation to function. As you travel this summer, thank the SPR for regulating fuel costs and helping you get where you need to go.
