America’s 700 Million Barrel Underground Oil Tanks

The US government became alarmed about access to crude oil after the 1973-1974 Organization of Arab Petroleum Exporting Countries (OAPEC) embargo, which drove gasification and oil prices to almost unaffordable levels. To address the challenge, the Energy Department created the Strategic Petroleum Reserve (SPR), which can hold up to 713 million barrels of crude oil in underground facilities, of which there are several.

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The creation of the SPR made sense at the time. However, it has become less useful. America is the world’s largest oil producer and set a record for any nation’s largest single month of oil production in December 2023.

Another issue is what the government pays to keep the SPR full. Today, it is at about 50% capacity. The average price the Energy Department paid for the crude is under $30 a barrel, and oil trades at $80 now. If the government decides to make up some of the deficit compared to the 713 million barrels, it would do so at a military billion loss.

How Was It Priced?

The current Administration has released SPR crude to keep gasoline prices low because gasoline is a major inflation component. The world uses over 100 million barrels of oil daily, so releasing tens of millions of barrels into such a large market would make very little price difference.

The SPR was a good idea when it was created. The oil industry has changed so radically over the intervening years that it no longer serves a purpose. Refilling it will cost the federal government money.

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