U.S. Selling Strategic Oil Reserves

Black Oil Barrels

Recent legislation, combined with lower dependence on imported oil, has led to sales from the U.S. Strategic Petroleum Reserve (SPR) of over 100 million barrels of crude oil. The transactions will be carried out in fiscal years 2022 through 2027, and, assuming no further legislation is passed, the SPR will decline by 40 percent from the 695 million barrels it held at the start of 2017 to about 410 million barrels by the beginning of 2028.

The SPR is the single largest inventory of government-owned crude oil on the planet and was established to offset unexpected oil supply reductions. Located in four storage sites along the Gulf of Mexico, the SPR had been at about 97 percent of its 713.5 million-barrel design capacity. A trio of bills enacted in 2015 and 2016 called for the sale of 149 million barrels between 2017 and 2025.

Most of these sales use volumetric requirements, with revenues going to the Department of Treasury. These oil sales are based on revenue targets authorized by Congress. The two recent congressional acts include:

  • The Bipartisan Budget Act of 2018 that calls for the sale of 30 million barrels from 2022 through 2025, 35 million barrels in 2026, and 35 million barrels in 2027.
  • The Tax Cuts and Jobs Act of 2017 that calls for the sale of seven million barrels between 2026 and 2027.

One of the SPR's core missions is to hold enough oil stocks to carry out U.S. obligations under the International Energy Program. The 1974 treaty established the International Energy Agency (IEA) and mandated that the U.S. must contribute to an IEA collective based on its share of oil consumption. The government relies on the SPR to meet this requirement.

As a member of the IEA, the U.S. is required maintain stocks of crude oil and petroleum products, both public and private, that match at least 90 days of net import amounts. As imports of oil and petroleum products have steadily declined in recent years due to a spike in domestic production, this IEA requirement can now be met with lower SPR inventory levels.

The Energy Information Administration (EIA) is projecting the U.S. to be a net exporter of petroleum by 2029. Based on November 2017 levels, the SPR currently holds crude oil inventories equivalent to 252 days of import protection. Private (commercial) stocks of crude oil provide an additional 452 million barrels, which is equivalent to another 172 days of import protection.

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