Tuesday 18 July 2023

'Very slow process' to refill strategic petroleum reserve that 'could take decades' after Biden admin's historic withdrawal, experts say

 It would be a "very slow process" to refill the strategic petroleum reserve that "could take decades" after the Biden administration initiated historic withdrawals, experts told Bloomberg News.

The SPR, established in 1975 by former President Gerald Ford (R), is currently at a 40-year low after the Biden administration ordered the release of more than 211 million barrels of oil in 2022, according to Politico

The release, which was supposed to prevent a jump in oil prices amid Russia's invasion of Ukraine, put the SPR at its lowest level since 1983.

The reserve has a total storage capacity of 714 million but is currently holding 346.8 million barrels, which is equivalent to 18 days' worth of supplies, Bloomberg reported.

While it took only six months for the Biden administration to sell 180 million barrels, it could take "decades" to refill, according to experts. The issued release was nearly five times larger than the previous one. 

John Shages, a former Department of Energy SPR manager, told Bloomberg that refilling the reserves would take time.

"It would be a very slow process even if you had the money and the facilities were are all in good shape," Shages stated. "It could take decades." 

To refill the reserves, which sit half-empty in underground salt domes, to 2009 levels would require purchasing 300 million barrels.

Oil costs have significantly increased over the years, making the refilling processes slow and expensive. Bloomberg reported that oil currently in the reserve averaged approximately $29.70 per barrel, whereas today's cost would be roughly $75.

The Biden administration's energy secretary, Jennifer Granholm, vowed to refill the SPR, but the department has also acknowledged that is unlikely to be accomplished within the near future.

In May, House and Senate Republicans wrote a letter to the Government Accountability Office, a federal watchdog, requesting an audit into the DOE's management of SPR.

The lawmakers also expressed concern that the drawdowns may have caused "structural damage to the SPR's pipelines and caverns, compromising its ability to meet its energy security mission in the event of a true energy supply disruption."

"DOE's mismanagement of the SPR has undermined America's energy security, leaving the nation more vulnerable to energy supply disruptions, and increasing the ability for OPEC and Russia to use energy as a geopolitical weapon," the letter stated. "Under President Biden, DOE has overseen the largest SPR drawdown in history, selling off more than 250 million barrels, equivalent to 42 percent of the reserve, with no credible plan to replenish the stockpile. DOE has failed to establish long-term plans for the optimal size, configuration, maintenance, and operational capabilities of the reserve."

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