The budget proposal President Trump released yesterday calls for the sale of 15 million barrels of oil from the Strategic Petroleum Reserve of the United States. The proceeds from the?
The budget proposal President Trump released yesterday calls for the sale of 15 million barrels of oil from the Strategic Petroleum Reserve of the United States.
The proceeds from the sale will be used to fund various projects, including the $242-million ?fixing? of a Naval Petroleum Reserve in California, Reuters reports.
Unlike with other proposals, this one might win bipartisan support: both Republican and Democratic legislators are in favor of sales from the SPR because its current level is above that required by international agreements about minimum necessary supplies and because two laws, passed in 2015 and 2018, respectively, also envisage sales of 15 million barrels of crude from the SPR this year and in 2021.
Another law, the 21st Century Cures Act, passed in 2016, called for the sale of some 25 million barrels from the Strategic Petroleum Reserve between 2017 and 2019.
The U.S. government set up the Strategic Petroleum Reserve more than forty years ago, in the wake of the Arab oil embargo that made the United States acutely aware of just how dependent its economy was on imported crude. To avoid a repeat of the painful fuel shortages the embargo caused, the U.S. began stocking up on crude.
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Yet now times are as different as can be. The United States is producing about 13 million barrels of oil daily and imports average 6.6 million bpd, according to the latest weekly data from the Energy Information Administration. The U.S. is much less dependent on imports of oil.
In fact, In the last few years, the SPR has turned into what the former head of the EIA calls a piggy bank. Legislators have been selling portions of the reserve to plug budget holes and reduce deficits, and also for backing new bills.
This has sparked a dispute on the actual purpose of the SPR, with some, including President Trump a couple of years ago, arguing that it does not need to be as large as it is, and others countering that while local production may be good now, things could change, and having a cushion as solid as the SPR would be a smart idea.
By Irina Slav for Oilprice.com
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