Challenges lie ahead for oil industry in short run: American Petroleum Institute senior vice president
American Petroleum Institute Senior Vice President Frank Macchiarola discusses the sharp downturn in oil prices and the short-term impact it will have on American producers.
The Strategic Petroleum Reserve (SPR) is the world’s largest supply of emergency crude oil owned by the US government.
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Why was the SPR created?
It was established in 1975 in the aftermath of the OPEC oil embargo, primarily to reduce the impact of disruptions in the sale of commercial oil and to carry out obligations of the United States under the International Energy program.
Where is the SPR?
Crude oil is stored at the SPR in underground salt caverns at four major oil storage facilities in the Gulf Coast region of the United States, two sites in Texas (Bryan Mound and Big Hill) and two sites in Louisiana (West Hackberry and Bayou Choctaw).
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How much oil is in the SPR?
The SPR currently has a storage capacity of 713.5 million barrels.
Oil can be pumped from the Reserve at a maximum rate of 4.4 million barrels per day for up to 90 days, then the drawdown rate begins to decline as storage caverns are emptied.
At 1 million barrels per day, the Reserve can release oil into the market continuously for nearly a year and a half.
How much does the U.S. charge for oil from the SPR?
The average price paid for oil in the SPR is $29.70 per barrel
Has the SPR ever been used in an emergency?
A presidentially directed emergency release has occurred three times in the history of the SPR:
First, in 1991, at the beginning of Operation Desert Storm, the United States joined its allies in assuring the adequacy of global oil supplies when war broke out in the Persian Gulf. An emergency sale of SPR crude oil was announced the day the war began.
The second was in September 2005 after Hurricane Katrina devastated the oil production, distribution and refining industries in the Gulf regions of Louisiana and Mississippi. Hurricane Katrina's impact was so great, in fact, that SPR emergency oil loans preceded the president's decision to drawdown and sell oil from the Reserve. The first of several emergency loan requests from refiners was received and approved within 24 hours of Hurricane Katrina making landfall.
The third time was in June 2011 when the United States and its partners in the International Energy Agency announced the release of 60 million barrels in response to crude oil supply disruptions in Libya and other countries. The U.S. obligation was 30 million barrels, and 30.6 million barrels were delivered by August 2011.
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