Strategic Petroleum Reserve:

Low Oil Prices Favor Increased Purchases

RCED-86-158: Published: May 22, 1986. Publicly Released: May 22, 1986.

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GAO commented on the Department of Energy's (DOE) plans to stop filling the Strategic Petroleum Reserve (SPR) in July 1986: (1) as a budget-cutting measure; and (2) because it believes it will have stored sufficient oil to meet a 90-day contingency supply commitment to cover import disruptions.

GAO found that SPR will have an inventory level of 502 million barrels of oil, which will meet the 90-day supply commitment; however, if oil imports increase as expected, it will need a larger inventory to meet the commitment. GAO questioned the DOE decision to stop filling SPR because of: (1) the statutory requirement to fill SPR to 527 million barrels by fiscal year (FY) 1988; (2) the recent drop in oil prices; (3) the expected loss of some domestic production with an increased dependence on imported oil; and (4) the expectation that oil prices would increase in the future. GAO believes that the current level of crude oil prices, the availability of storage capacity, and nearly $580 million in unobligated oil account funds provide DOE an opportunity to continue acquiring SPR oil and meet its statutory requirement at a lower cost and with no additional appropriations. GAO also believes that DOE needs to take advantage of the opportunity to increase its SPR storage capacity to 600 million barrels within a relatively short time.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Congressional action mandating an increased fill rate makes this recommendation moot.

    Recommendation: The Secretary of Energy should direct the SPR project manager to continue oil purchases at maximum fill rates beyond the July 1986 cutoff date and attain the 527-million-barrel inventory level.

    Agency Affected: Department of Energy

  2. Status: Closed - Implemented

    Comments: The Secretary of Energy ordered leaching to restart in July 1986. However, a goal of 600 million barrels was not articulated and present plans call for completion by the second quarter of 1988.

    Recommendation: The Secretary of Energy should direct the SPR project manager to resume cavern leaching activities as soon as possible with the objective of having 600 million barrels of capacity available by the end of FY 1987.

    Agency Affected: Department of Energy

  3. Status: Closed - Not Implemented

    Comments: Congressional action mandating an increased fill rate makes this recommendation moot.

    Recommendation: The Secretary of Energy should direct the SPR project manager to continue filling the SPR beyond the 527-million-barrel level at rates commensurate with oil prices, import levels, and availability of funding and storage capacity.

    Agency Affected: Department of Energy

  4. Status: Closed - Not Implemented

    Comments: Congress overturned the deferral making this recommendation moot.

    Recommendation: In order to undertake the above steps, the Secretary of Energy should request Office of Management and Budget approval to release whatever amount of the deferred funds is needed.

    Agency Affected: Department of Energy

 

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