The Strategic Petroleum Reserve

In September 1981, GAO reported that, with the exception of the recent buildup of the Strategic Petroleum Reserve (SPR), the United States is no better prepared to deal with significant disruptions in oil imports now than it was during the 1973 oil embargo. Specific plans have not yet been developed for the use of SPR during an emergency. A specific plan should be developed and integrated with energy emergency preparedness plans. The reserve does not have to be sized to meet supply shortfalls. It can be supplemented by: (1) using existing industrial stocks; (2) fuel switching; (3) restraining demand or managing supplies through conservation or allocation; (4) creating an industrial petroleum reserve; or (5) using political, military, or economic leverage to affect the size and duration of the shortfall. An informed, but subjective, judgment must be made about the size of the reserves required. During fiscal year (FY) 1981, the Administration far surpassed its required minimum and almost met a higher goal. As of February 1982, SPR contained about 32 percent of its planned barrel capacity. The Department of Energy (DOE) is now approaching the limits of its available storage capacity. Because of the long lead times required to add storage capacity, funding and program decisions made now can dictate the volume of oil that can be added and the completion date for the SPR. DOE needs to consider the costs and benefits of alternatives to its current capacity expansion plans, including leasing existing storage space, or substituting above ground storage tanks for planned underground capacity. Congress should study the capacity expansion plans and options with DOE to affirm or provide new guidance on the desired SPR fill rate. The Administration proposes to defer funds associated with the development of one new storage site. This proposal will not affect planned SPR capacity until FY 1987. Then, additions to capacity will drop by 13 million barrels. Since 1980, DOE has purchased a large quantity of heavier crude oil without assessing refinery product needs and capabilities. The likely impact of the heavier crudes on the mix of oil products which might be available is not known at this time. However, the purchase of heavier crudes for SPR should be monitored closely and, if necessary, modified.