U.S. Oil Stockpile Draws Criticism
Drive past the alligator-infested marsh and the chemical plants on “Chlorine Road,” and you’ll reach the federal government’s version of that spare can of gasoline in your garage.
Here, in a cluster of underground salt caverns a stone’s throw from the Gulf of Mexico, the government stockpiles crude oil. The cylinder-shaped cavities, together with three other stashes in Texas and Louisiana, hold 635 million barrels, a bit more than what the U.S. imports in two months.
The caverns average about 200 feet wide and are up to 2,000 feet deep, with one big enough to swallow Chicago’s Sears Tower. Long used for storage by the oil industry, the caverns started filling up with crude purchased by the U.S. government in the wake of the 1973-74 Arab oil embargo.
The Strategic Petroleum Reserve was created to shield the country against supply disruptions. Its mere existence, federal energy officials say, is a deterrent to foreign producers that might want to shut off imports to the U.S. But some lawmakers suggest that the SPR may be doing U.S. consumers more harm than good.
Although Sen. Carl Levin (D-Mich.) believes that a fully stocked reserve is a good idea, he thinks it’s unfair to American consumers to fill it regardless of market supply. Rather, he thinks it should be filled when supply is plentiful and prices are low.
After the Sept. 11 terror attacks, President Bush issued orders to fill the reserve to its capacity of 700 million barrels, which has meant moving as much as 5 million to 6 million barrels of oil a month from the open market into the SPR, pushing the reserves to their highest level.
As oil prices began rising in advance of the war with Iraq, the Senate Permanent Subcommittee on Investigations, of which Levin is a member, began looking at the reasons for the run-up. It concluded in March that Bush’s post-Sept. 11 decision was a major factor behind pump prices’ reaching their highest level in 12 years, because it took crude off the market that could have gone into making gasoline.
Energy Secretary Spencer Abraham disputed the subcommittee’s conclusions, saying in a letter to Levin in September that the crude moved into the Strategic Petroleum Reserve under Bush’s order accounted for “between zero and three-tenths of 1% of world oil demand in recent months.”
Abraham said oil prices were driven up instead by worldwide demand growth, prolonged civil unrest in Nigeria and Venezuela, and a significant cut in production levels in June by the Organization of the Petroleum Exporting Countries to accommodate an expected return of Iraqi exports.
This fall, Levin and Sen. Susan Collins (R-Maine) unsuccessfully pushed for legislation to force the Energy Department to consider the cost and availability of oil when filling the petroleum reserve.
There are other complaints from economists and oil experts who would like to see the very purpose of the reserve modified: to make its inventory readily available to stabilize fluctuating oil costs.
Robert Ebel, head of the Center for Strategic and International Studies, a Washington-based think tank, believes the government should dip into the SPR more often.
“To me, it’s become a frozen asset, and we might want to revisit the SPR and take another look at its use and purpose and perhaps use it more often to regulate the price,” Ebel said. “There’s great reluctance to do that to mitigate prices, because that wasn’t the original purpose.”
The reserve has been tapped only twice since it was created in 1975. In September 1990, when oil prices were soaring as a result of the economic sanctions imposed on Iraq after it invaded Kuwait, President George H.W. Bush authorized the test sale of 5 million barrels of SPR oil. Ten years later, President Clinton successfully lowered gasoline prices by releasing 30 million barrels, a move that experts say helped stabilize gas prices for almost a year.
The recent attention to the reserve comes after decades of sleepy existence in this flat, sun-baked area of the gulf.
Originally, mining engineers discovered five caverns here 100 years ago inside a salt dome. Such domes are formed over millions of years as salt water evaporates, creating layer upon layer of salt forged together by geological pressure.
Other salt domes were discovered about the same time along the Gulf Coast as well as in a northeastern Texas town that has come to be known as Grand Saline, where Morton Salt Co. flourished in the 1930s and 1940s.
Government officials insist that the caverns are less expensive and have less of an effect environmentally than storing crude oil above ground in tanks. To develop and maintain man-made storage, they say, would cost $4.50 to $5 a barrel per year. That’s compared with just 19 cents a barrel annually to maintain the salt caverns.
“If the president says we have an emergency, we have drawdown in 13 days,” said SPR spokesman Jorge Aguinaga, referring to the amount of time to get the crude oil flowing to refineries around the country.
The process for distilling gasoline from crude oil usually takes about a month. In the event of an oil emergency, it’s akin to having energy in the bank.
“And nobody can steal it,” Aguinaga said.
