TITLE

Strategic Petroleum Reserve: GAO-08-521T

PUB. DATE
February 2008
SOURCE
GAO Reports;2/26/2008, p1
SOURCE TYPE
Government Documents
DOC. TYPE
Article
ABSTRACT
The Strategic Petroleum Reserve (SPR) was created in 1975 to help insulate the U.S. economy from oil supply disruptions and currently holds about 700 million barrels of crude oil. The Energy Policy Act of 2005 directed the Department of Energy (DOE) to increase the SPR storage capacity from 727 million barrels to 1 billion barrels, which it plans to accomplish by 2018. Since 1999, oil for the SPR has generally been obtained through the royalty-in-kind program, whereby the government receives oil instead of cash for payment of royalties on leases of federal property. The Department of Interior's Minerals Management Service (MMS) collects the royalty oil and transfers it to DOE, which then trades it for oil suitable for the SPR. As DOE begins to expand the SPR, past experiences can help inform future efforts to fill the reserve in the most cost-effective manner. In that context, GAO's testimony today will focus on: (1) factors GAO recommends DOE consider when filling the SPR, and (2) the cost-effectiveness of using oil received through the royalty-in-kind program to fill the SPR. To address these issues, GAO relied on its 2006 report on the SPR, as well as its ongoing review of the royalty-in-kind program, where GAO interviewed officials at both DOE and MMS, and reviewed DOE's SPR policies and procedures. DOE provided comments on a draft of this testimony, which were incorporated where appropriate. To decrease the cost of filling the SPR and improve its efficiency, GAO recommended in previous work that DOE should include at least 10 percent heavy crude oils in the SPR. If DOE bought 100 million barrels of heavy crude oil during its expansion of the SPR it could save over $1 billion in nominal terms, assuming a price differential of $12 between the price of light crude oil and the lower price of heavy crude oil, the average differential over the last five years. Having heavy crude oil in the SPR would also make the SPR more compatible with many U.S. refineries, helping these refineries run more efficiently in the event that a supply disruption triggers use of the SPR. DOE indicated that, due to the planned SPR expansion, determinations of the amount of heavy oil to include in the SPR should wait until it prepares a new study of U.S. Gulf Coast refining requirements. In addition, we recommended that DOE consider acquiring a steady dollar value--rather than a steady volume--of oil over time when filling the SPR. This "dollar-cost-averaging" approach would allow DOE to acquire more oil when prices are low and less when prices are high. GAO found that if DOE had used this purchasing approach from October 2001 through August 2005, it would have saved approximately $590 million, or over 10 percent, in fill costs. GAO's simulations indicate that DOE could save money using this approach for future SPR fills, regardless of whether oil prices are trending up or down as long as there is price volatility. GAO also recommended that DOE consider...
ACCESSION #
31129179

 

Related Articles

  • Oil Supply: An Overview. Watts, Christine // Australia Points of View: Oil Supply;12/1/2018, p1 

    General information regarding oil supply is presented. The author reviews reliance on fossil fuels for energy production, the environmental impact of oil usage, and the effect of energy consumption on oil reserves. Oil production and exploration in Australia, increased global demand for oil, and...

  • Region looks to heavy end of the barrel. GAVIN, JAMES // MEED: Middle East Economic Digest;12/3/2010, Vol. 54 Issue 49, p39 

    The article reports that regional producers in the Middle East require expertise to aid the extraction of heavier grades of oil that could be used to meet global demand for petroleum. It reports that the oil reserves of discovered heavy and extra-heavy oil resources in the Middle East are...

  • Strategic Petroleum Reserve: GAO-08-726T. Rusco, Frank // GAO Reports;4/24/2008, p1 

    The Strategic Petroleum Reserve (SPR) was created in 1975 to help protect the U.S. economy from oil supply disruptions and currently holds about 700 million barrels of crude oil. The Energy Policy Act of 2005 directed the Department of Energy (DOE) to increase the SPR storage capacity from 727...

  • PETROLEUM REFINING & RELATED INDUSTRIES.  // U.S. Industry Quarterly Review: Energy;2002 3rd Quarter, p29 

    No abstract available.

  • HOT. Schlosser, Julie // Fortune;9/30/2002, Vol. 146 Issue 6, p35 

    Presents information on the petroleum industry. Efforts by the U.S. to secure oil from West Africa; Expectation that global demand is set to rise a robust 1.6 million barrels a day in the fourth quarter of 2002; Declaration by McDonald's Corp. to use a healthier blend of the slick stuff for its...

  • Section 11. International Petroleum.  // Monthly Energy Review;Dec2004, p149 

    This article presents information about the international status of petroleum production. World crude oil production during September 2004 was 73 million barrels per day, up 0.7 million barrels per day from the level in the previous month. World crude oil production in the first 3 quarters of...

  • Magnetic Monitoring of Iron Impurities in Petroleum Products: Determination of Limiting Rate in an Analyzer. Sandulyak, A.; Ershova, V. // Chemistry & Technology of Fuels & Oils;Jul2013, Vol. 49 Issue 3, p259 

    It is noted that the existing methods of magnetic monitoring of iron impurities in petroleum products need refinement, including validation of the specimen flow rate limits in the analyzer. Based on a simplified condition for the competition between magnetic and hydrodynamic forces, an...

  • Nervous traders keep prices high.  // MEED: Middle East Economic Digest;10/17/2003, Vol. 47 Issue 42, p14 

    Analyzes the prices of petroleum products in the world market. Factors that drive the oil prices; Performance of U.S. crude stocks; Concerns on the disruption of oil supplies.

  • Industry Forecast Scenario.  // Oman Oil & Gas Report;Q4 2008, p39 

    The article offers information on the industry forecast of Oman. It focuses on its oil and gas reserves, oil supply and demand and gas supply and demand. Its gas reserves is at 690 billion cubic meters (bcm), which have upside potential and is forecasted to increase to 800 bcm by 2011-2012....

Share

Read the Article

Courtesy of THE LIBRARY OF VIRGINIA

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics