By Julian Torres, CNN
New York (CNN) — With war in the Middle East raging, oil prices are soaring. To temper the costs, the United States government is turning to oil stored in massive salt caverns.
The US Department of Energy (DOE) announced yesterday that the US will release 172 million barrels of oil from the Strategic Petroleum Reserve (SPR).
What exactly is the SPR? Where is it? How much oil is in it, where does it come from and where does it go when it’s released?
What is the US SPR?
The US SPR is the world’s largest supply of emergency crude oil. The reserve has been maintained by the federal government since 1975 to help protect the US economy from major disruptions in petroleum supply.
The system stores federally owned crude oil in more than 60 underground salt caverns along the Gulf Coast.
Each cavern is enormous, roughly 200 feet in diameter and more than 2,500 feet tall. That is large enough to nearly fit the height of two Empire State Buildings stacked on top of each other.
At full capacity, the SPR can store more than 700 million barrels of oil, but inventories fluctuate depending on fuel being released and purchased. The reserve currently holds roughly 415 million barrels following major withdrawals as a result of a spike in oil prices following Russia’s invasion of Ukraine in 2022.
The US holds about one-third of the emergency oil reserves that are maintained by members of the International Energy Agency, a global forum of dozens of countries that helps members deal with major oil disruptions. The IEA members collectively hold over 1.2 billion barrels of emergency oil reserves.
Where does the oil come from?
In many cases, the DOE purchases crude oil outright on the open market to fill the underground reserves when prices are relatively low.
In other situations, the government also receives oil through exchange agreements with private companies. Under these agreements, companies temporarily borrow oil from the reserve and repay it later with additional barrels — similar to paying interest on a loan.
The reserve can also store excess oil during periods of weak demand. During the height of the pandemic, for example, the government allowed companies to store surplus crude in the SPR as demand crashed.
When is oil released?
Oil from the SPR has been released during both domestic and international crises, including natural disasters and geopolitical conflicts like the current effective closure of the Strait of Hormuz.
The US president can authorize emergency drawdowns. The DOE then sells the oil to the highest bidders, typically major refining, trading and oil companies.
Because the reserve is connected by pipelines and marine terminals along the Gulf Coast, oil can begin flowing to US refineries within about 13 days after a presidential order to release it.
But oil from the SPR is not only released during emergencies. The secretary of energy can authorize test sales or temporary exchanges with private oil companies during localized disruptions, like when Hurricane Katrina cut off domestic supply chains in 2005.
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