The 50 million barrels of oil that President Joe Biden said the country would release from its Strategic Petroleum Reserve would be the biggest release in U.S. history and almost twice as much as the largest previous release.
The release, which Biden announced Tuesday, is about 8 percent of the 621 million barrels in reserve, according to data from the Energy Department.
Before 2017, there had been only three emergency sales from the reserve, spurred by disruptions like the Gulf War in 1991, Hurricane Katrina in 2005 and the Libyan civil war in 2011.
Since then, Congress has put sales mandates in the last several budgets, in part to modernize the reserve system itself. And exchanges — in which the government in essence lends oil to companies, who then must return the same amount plus interest — were used to offset disruptions from Hurricane Harvey in 2017, as well as hurricanes Isaac, Gustav and Ike.
While the amount Biden is releasing is unprecedented, the methods to withdraw oil have become more common, as lawmakers use the reserves to balance the budget — and offset disruptions from hurricanes.
The move prompted criticism. Dan Brouillette, who was energy secretary during the Trump administration, told CNBC on Wednesday, “It’s not a supply emergency, and the only emergency I can … see in this case is a political emergency.”
Sen. Joe Manchin, D-W.Va., said that the release was “an important policy Band-Aid” for rising gas prices but that it does not solve “the self-inflicted wound that shortsighted energy policy is having on our nation.”
The 50 million barrels will be released two ways: 32 million barrels will be exchanged, while the remaining 18 million barrels will come from a sale Congress approved in the 2018 budget, which earmarked 15 percent of the reserve for future sale. In 2017, President Donald Trump wanted to sell half of the reserves to bolster the budget.
U.S. refineries typically produce about 19 to 20 gallons of motor gasoline and 11 to 12 gallons of ultra low-sulfur distillate fuel oil (diesel) from one 42-gallon barrel of crude oil, according to the U.S. Energy Information Agency.
Exchanges and sales used to be rare.
The first sale was a test sale of 5 million barrels in 1985, and the second was in 1990, when President George H.W. Bush sold 5 million barrels to test the readiness of the system.
The following year, he authorized the first emergency sale of 17.3 million barrels of reserve oil after the launch of Operation Desert Storm. The reserve was created as a direct response to the oil crisis of the 1970s after the Arab-Israeli War.
In 1996, a pipeline blockage prompted the first exchange of nearly 1 million barrels. Since then, exchanges have been used more to combat disruptions, like hurricanes.
Source: CNBC News