Refinery outages, price spikes and fuel shortages created by hurricanes Harvey and Irma show the value of maintaining a robust Strategic Petroleum Reserve to inject oil supplies into the market at times of crisis, former presidential energy advisers said Friday.
The Trump administration proposes slowly selling nearly half of the reserve over a decade to reduce the federal debt. Congress already has approved some reserves sales through 2025. But Harvey forced the release of some of the reserve, and the potential is there for further disruptions in energy markets as Irma, packing 150-mph winds, approaches Florida.
It’s foolish to “mindlessly sell it off” as President Donald Trump put forward in his budget, said Bob McNally, energy adviser to former President George W. Bush and a fellow at Columbia University’s Center on Global Energy Policy.
“Harvey has reminded of the importance of having a government stockpile when you have a major and severe supply interruption, whether geopolitical, or in this case, weather, where companies just simply weren’t able to get supplies,” he said. “And so, in that crisis, those – even if it’s a few barrels – are very, very valuable barrels.”
Harvey disrupted crude supplies and shut down nearly 25 percent of the nation’s fuel-making capacity along the Texas Gulf Coast, sending average gasoline prices climbing about 40 cents a gallon. To ease shortages, Energy Secretary Rick Perry authorized the release of 5.3 million barrels of crude oil to refineries owned by Phillips 66, Valero Energy and Marathon Petroleum, which will replenish the oil as new supplies become available.
The petroleum reserve, the world’s largest stockpile of emergency oil, was created in 1975, two years after the Arab oil embargo, to ensure the country couldn’t be held hostage by foreign oil interests. The U.S. has about 675 million barrels of oil in the reserve, which is stored in four salt caverns in Texas and Louisiana. The largest is south of Houston, at Bryan Mound in Freeport
The shale boom, which again made the United States one of the world’s largest producers, has raised questions of whether the nation still needs to maintain large stockpiles of crude. Since 2015, Congress has authorized the sale of about 190 million barrels of oil to fill budget holes.
The current sentiment in Washington is that a strong reserve is no longer necessary, said Guy Caruso, a former chief of the U.S. Energy Information Administration under Bush, who’s now a senior adviser at the Center for Strategic and International Studies, a nonpartisan think tank.
“The mood in Congress tends to lean more toward selling off the SPR than adding to it,” Caruso said.
Ernest Moniz, energy secretary under President Barack Obama, has argued in favor of modernizing, rather than shrinking, the reserve, so the oil can more easily be tapped and moved to where it’s needed. The reserve also can help stabilize oil prices when supplies are interrupted, Moniz has argued.
In the meantime, people are watching to see how much Irma disrupts fuel and oil supplies. Gasoline shortages are being reported throughout Florida and in parts of Georgia and the Carolinas.
Houston-area gasoline prices have risen from an average of $2.10 a gallon to $2.52 since shortly before Harvey made landfall on August 25. The national average is up to $2.69, an increase of 37 cents, according to GasBuddy.com, a website that tracks gasoline prices.
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