Guest “thank you Mr. President” by David Middleton
Trump says U.S. to buy oil to fill up the Strategic Petroleum Reserve
By Myra P. Saefong
Published: Mar 13, 2020
President Donald Trump announced Friday that the U.S. will buy large quantities of oil to fill the country’s Strategic Petroleum Reserve. “We’re gonna fill it up. It’s a good time to fill it up,” Trump said at a press conference, during which he declared a national emergency to access additional aid to cope with the spread of COVID-19. As of March 6, the SPR held a total of 635 million barrels of crude oil. Its current storage capacity is 713.5 million barrels.
I don’t know how quickly DOE will fill up the SPR. With about 78.5 million barrels (bbl) of available capacity, they could absorb 250,000 bbl/d of excess production for about 10 months. Russia and Saudi Arabia (mostly the Saudis) reportedly will be increasing production by about 3-3.5 million bbl/d. Totally offsetting that would fill the SPR in less than 1 month. This already appears to have had a stabilizing effect on prices.
The SPR can be drawndown at a maximum rate of 4.4 million bbl/d. The US currently imports close to 1 million bbl/d from Russia and Saudi Arabia. The US could consider suspending imports from OPEC+ (~2 million bbl/d), replacing it with domestic production and SPR releases. This would have a more significant effect on prices, allowing us to “hit back” a bit.