OPINION: Strategic Oil Reserve Proves Its Value Now
03.07.2022 - NEWS

March 7, 2022 [BEAUMONT ENTERPRISE] – There aren’t a lot of things from the 1970s that Americans look back on fondly. Few people, for example, miss disco dancing.

 

But there is one artifact from that decade that has proved its value over the years — the Strategic Petroleum Reserve. It was started in 1975 after the Mideast oil embargo.

At a time when world tensions — and the price of oil — are so high because of the Russian invasion of Ukraine, the reserve offers some hope to consumers. President Biden has authorized the release of 30 million barrels of oil into the U.S. supply to help stabilize gasoline prices. Our allies will also release about 30 million barrels from their reserves to help prices in their countries.

The U.S. reserves will be coming from one of four sites on the Gulf Coast — two in Texas, two in Louisiana — where oil is stored in huge underground salt caverns. The Big Hill site near Winnie holds 65 million barrels of sweet crude and 74 million barrels of sour.

The strategic reserve is fortunately located close to refineries in Southeast Texas and other parts of the Gulf Coast. The oil can be quickly moved to those refineries to be converted to gasoline.

Thirty million barrels is a lot of oil, though it is only a little more than the 20 million barrels used in the nation daily. But the move can have a psychological impact on oil prices, and the reserve has a capacity of 727 million barrels. So there’s obviously a lot more oil there that could be brought out.

The reserve is designed just for a crisis like this. Oil can be released now when gasoline prices are high. And right, now oil prices are high. The Global benchmark Brent crude price is over $100 per barrel, its highest since August 2014.

Later, when tensions ease and the price of oil drops, the federal government can purchase more oil to refill the reserve. A lot of oil in the reserve was bought when oil cost about $30 per barrel.

The current price surge is good for oil producers in West Texas. Yet for consumers, higher oil prices mean higher gasoline prices, and most motorists don’t like the current price at the pump of more than $3 per gallon. Unfortunately, some analysts predict that pump prices could exceed $4 per gallon soon. And all this is occurring as the weather warms and coronavirus levels continue to decrease. Those factors will put more people on the roads — and keep gas prices from falling due to reduced demand.

None of this is what U.S. consumers want to see, but the Ukrainian crisis is going to keep prices high for a while — and inflation was already doing a good job of that. But at least government officials have a few tools in the box to help soften this trend, and the Strategic Petroleum Reserve is one of the best. President Biden should use it more in coming weeks.

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