The Challenges and Limits of Filling the US Strategic Oil Reserve

With the current oil price below $79 per barrel, the US government is considering measures to replenish its Strategic Oil Reserve (SOR). However, as we will explore, there are several practical and economic limitations that make this task more complex than it appears.

Physical and Budgetary Constraints

According to the US government deputy secretary for energy, there is a physical limit to how much oil can be stored into the US Strategic Oil Reserve each month, with the capacity being about 3 million barrels. In addition, the government has a limited budget of roughly $60 billion to purchase the replacement oil, requiring Congress to approve further spending if more oil is needed.

Government Criticism and Incompetence Claims

The criticism directed at President Biden often comes from those disappointed with the government's actions. It has been argued that Biden was dishonest about his efforts to lower oil prices, instead opting to sell oil to Europe, a move that damaged relationships with other countries and raised tensions with Russia. This criticism, often seen as partisanship, highlights how public sentiment can influence discussions around oil policy.

Strategic Oil Reserve Incentives and Regulations

Some states are already implementing regulations requiring refineries to maintain high volumes of oil reserves to prevent price spikes during maintenance periods. Congresswoman Harris advocates for a national-level implementation of such policies. These efforts are aimed at maintaining stability in the market and protecting consumers from sudden price increases.

Petroleum Science and Geopolitical Considerations

The extraction and processing of crude oil involve complex scientific and geopolitical considerations. Since 2008, the US has been a major importer of Canadian, Venezuelan, and Mexican crude oil, which is high in sulfur. Due to the nature of American refineries, many of which do not have access to local crude oil, these refineries can only process sulfur-rich oil. This interdependence means that American refiners and producers are part of a global network of contracts.

When crude oil is stored, it is subjected to temperature changes that can affect its volatility. Highly volatile compounds, which are also highly flammable, can pose safety risks. For this reason, storage facilities often maintain a 25-35% empty space in their tanks to allow for the safe venting of volatile compounds. Mixing different types of crude oil can also render the mixture worthless, leading to potential legal and operational issues.

The volumetric capacity of the Strategic Oil Reserve is significant but not limitless. According to estimates, there is enough capacity to store more than a billion barrels but only about 797 million barrels are useable, due to the aforementioned issues with mixing different types of crude oil. This limits the practicality of simply using the reserve to store every bit of crude oil obtained.

In conclusion, while the US Strategic Oil Reserve could be replenished in the short-term to meet budgetary and tactical goals, the limitations imposed by physical storage capacity, budget constraints, and the need to adhere to international contractual obligations present significant challenges. These factors underscore the complexity of oil policy and the need for careful consideration and planning.