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Home Climate & Society Energy / Carbon Pricing & Economics

Trump Proposes to Cut Strategic Petroleum Reserve 50% by 2027

May 24, 2017
Reading time: 2 minutes

Department of Energy/Flickr

Department of Energy/Flickr

 

The 2018 White House budget released this week includes a proposal to sell off half of the U.S. Strategic Petroleum Reserve, a 688.1-million-barrel stockpile first established in December 1975 to protect the country from oil supply shocks like the 1973 OPEC oil embargo.

The Trump administration is pitching the plan as a deficit reduction measure worth US$16 billion in revenue over the next decade, made possible by the increase in U.S. domestic oil and gas production.

“The proposal probably will run into sharp differences in Congress and among oil experts, most of whom say the reserve should remain a buffer in an emergency,” the Washington Post reports. “The administration has proposed selling off 270 million barrels from the reserve by the year 2027, a move that it also said would allow it to retire two out of the four Gulf Coast facilities that store the oil.”

Coverage in the Post and elsewhere highlights the continuing disagreement among expert analysts on whether the U.S. still needs the SPR.

“The reserve was created at a time when the nation was very dependent on imported oil,” wrote economist Philip Verleger in 2014. “The dependency is in the past. The Reserve no longer serves the purpose for which it was developed.”

“The United States definitely doesn’t need as much SPR as they have now lower imports,” agreed Amrita Sen of the consultancy Energy Aspects.

But “the risk of complete collapse in Venezuela is just one of many reminders that the world remains vulnerable to oil price shocks, and those will be felt by U.S. consumers at the pump just as much today,” countered ex-Obama climate and energy security advisor Jason Bordoff, now director of Columbia University’s Center on Global Energy Policy.

“The Strategic Petroleum Reserve is America’s only formal short-term line of defence against oil supply disruptions and price spikes,” added Robbie Diamond, president of Securing America’s Future Energy. “While we’ve been lulled into a false sense of complacency by the current period of relatively low oil prices, disruptions and volatility in the oil market are alive and well.”

The Post concludes that a decade-long plan to trim the SPR by 50% would have “limited impact” on world old prices. “The sale would amount to just 74,000 barrels a day, a modest amount of global consumption of 96 million barrels a day. But it would slow down efforts by the Organization of the Petroleum Exporting Countries to reduce global inventory levels that are near record highs.”



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