Almost 4 decades ago, in response to the Arab oil embargo and recession it triggered, Congress passed legislation establishing the Strategic Petroleum Reserve (SPR) to release oil to the market during supply disruptions and protect the U.S. economy from damage. The SPR is owned by the federal government and operated by the Department of Energy (DOE) and is the world’s largest government-held emergency stockpile of crude oil. According to DOE, the SPR held almost 691 million barrels of crude oil valued at about $45 billion as of December 2014. In total, over the period from fiscal years 2000 through 2013, the federal government spent about $500 million to purchase crude oil for the SPR. In addition, operating and maintenance costs for the SPR amounted to about $2.5 billion over this period. According to DOE officials, SPR infrastructure is aging, may need to be relocated, and will need to be replaced soon.
Decreasing reliance on imported crude oil has potential implications for the SPR. After decades of generally falling U.S. crude oil production, technological advances have contributed to increasing U.S. production. Monthly crude oil production has increased by almost 68 percent from 2008 through April 2014, and increases in production in 2012 and 2013 were the largest annual increases since the beginning of U.S. commercial crude oil production in 1859, according to the Energy Information Administration (EIA). Meanwhile, net crude oil imports—imports minus exports—have declined from a peak of about 60 percent of consumption in 2005 to 30 percent in the first 5 months of 2014. According to some forecasts, net imports are expected to remain well below 2005 levels into the future.
 DOE calculated the market value of the SPR as of December 2014 using crude oil prices for three marker crudes: (1) West Texas Intermediate; (2) Brent; and (3) Louisiana Light Sweet.
 EIA is a statistical agency within the Department of Energy that collects, analyzes, and disseminates independent information on energy issues.
In September 2014, GAO found that DOE had taken steps to assess aspects of the SPR but had not recently reexamined its size. The SPR is a significant national asset, and it is important for federal agencies tasked with overseeing such assets to examine how, if at all, changing conditions affect their programs. In the past, GAO has found that federal programs should be reexamined if there have been significant changes in the country or the world that relate to the reason for initiating the program. In that report, GAO further found that many federal programs and policies were designed decades ago to respond to trends and challenges that existed at the time of their creation, and that agencies should reexamine their programs if conditions change. In September 2014, GAO found that DOE had taken some steps to reexamine some aspects of the SPR. For example, in March 2014, DOE conducted a test sale of SPR crude oil to evaluate the SPR’s ability to draw down and distribute SPR crude oil through one of its distribution systems. As a member of the International Energy Agency (IEA), the United States is required to maintain public and private reserves of at least 90 days of net imports and to release these reserves and reduce demand during oil supply disruptions. DOE officials said that the last time they conducted a comprehensive reexamination of the SPR was in 2005 because the SPR only recently met the IEA requirement to maintain 90 days of imports. However, without such a reexamination, DOE cannot be assured that the SPR is holding an appropriate amount of crude oil. As shown in the figure, IEA data show that U.S. reserves as of September 2014 are in excess of this international obligation; specifically, the SPR held reserves of 106 days, and private industry held reserves of 141 days for a combined total of 247 days. The figure presents one scenario where U.S. reserves are expected to continue to be in excess in the future.
United States’ Historic and Estimated Compliance with International Energy Agency Obligation to Hold Reserves
Note: Data for 2015 and later are based on September 2014 reserve levels reported by the International Energy Agency and forecast changes in net imports from the Energy Information Administration’s (EIA) reference case forecast, a business-as-usual estimate that assumes current laws and policies remain unchanged. EIA’s forecast includes several cases, highlighting uncertainty about future conditions which are not depicted in this figure.
aAs of September 2014.
 The IEA was established in 1974 to help coordinate the responses of oil-consuming industrialized countries to oil supply disruptions and other energy-related problems. Based in Paris, the IEA is an autonomous organization within the framework of the Organization for Economic Cooperation and Development and is currently made up of 29 member countries: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Republic of Korea, Luxembourg, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.
 The figure presents a forecast where U.S. reserves are expected to be in excess under the EIA’s reference case, a business-as-usual estimate that assumes current laws and policies remain unchanged.
In view of recent changes in market conditions and in tandem with DOE’s ongoing activities to assess other aspects of the SPR, GAO recommended in September 2014 that the Secretary of Energy
If DOE were to assess the appropriate size of the SPR and find that it held excess crude oil, the excess crude oil could be sold to fund other national priorities. For example, if DOE found that 90 days of imports was an appropriate size for the SPR, it could sell crude oil worth $6.7 billion and use the proceeds to fund other national priorities. In addition, GAO estimates that DOE may be able to reduce its operating costs by about $25 million per year, based on GAO’s calculation of the amount of oil in excess of 90 days of net imports as of September 2014 and DOE’s assessment of its annual operating cost for the SPR at $.25 per barrel. In addition, in light of recent crude oil price volatility, if DOE were to find that the SPR held excess oil, it may benefit from assessing how best to execute a sale, taking into consideration factors such as effects on crude oil prices and potential revenue raised. Conducting a reexamination of the size of the SPR could also help inform DOE’s decisions about how or whether to replace existing infrastructure.
 This estimate is GAO’s calculation of the amount of oil in excess of 90 days of net imports as of September 2014 and the average crude oil price of three marker crudes: (1) West Texas Intermediate; (2) Brent; and (3) Louisiana Light Sweet as of December 2014. In 2011, the Congressional Budget Office analyzed a budget reduction option that would reduce the SPR’s holdings by about 10 percent during the 2012-2016 period and then maintain a reserve of 650 million barrels. They estimated that this would have generated roughly $6 billion over 5 years. See Congressional Budget Office, Reducing the Deficit: Spending and Revenue Options, Pub. No. 4212 (Washington, D.C.: March 2011).
The information contained in this analysis is based on findings from the report listed in the related GAO products section. For that report, GAO reviewed literature and agency documents, interviewed DOE officials, and summarized the views of a nonprobability sample of stakeholders including academic, industry, and other experts.
Table 11 in appendix V lists the programs GAO identified that might have opportunities for cost savings.
In commenting on the September 2014 report on which this analysis is based, DOE concurred with GAO's recommendation and stated that a broad, long-range review of the SPR is needed.
GAO provided a draft of this report section to DOE for review and comment. On February 13, 2015, DOE’s Office of Fossil Energy provided written comments and stated that DOE has initiated the process for conducting a comprehensive reexamination of the appropriate size of the SPR. Specifically, DOE is reviewing the scope of a proposed strategic review to determine future actions and establish specific timeframes for completing the study. Among other things, this review is anticipated to take into consideration what the role of the SPR should be relative to U.S. energy and economic security goals and objectives and International Energy Program requirements; what the optimal configuration of the SPR should be; and whether existing legal authorities are adequate to ensure the SPR can meet both current and future U.S. energy and economic security goals and objectives.
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The studies GAO reviewed and stakeholders interviewed suggest that removing crude oil export restrictions is likely to increase domestic crude oil prices but decrease consumer fuel prices. Prices for some U.S. crude oils are lower than international prices—for example, one benchmark U.S. crude oil averaged $101 per barrel in 2014, while a comparable international crude oil averaged $109. Studies...