Energy experts warn Hurricane Harvey shows the need for America to maintain its strategic oil reserve, an emergency fund that Congress has used in recent years to pay for deficit reduction and other unrelated items.
The Energy Department on Thursday released 1 million barrels of oil from the Strategic Petroleum Reserve to Phillip 66’s Lake Charles refinery in Louisiana, as the remnants of Harvey barreled through the Gulf Coast, causing a surge in gasoline prices.
Energy Secretary Rick Perry said Friday his department released an additional 3.5 million barrels from the reserve to large refineries owned by Marathon Petroleum Corporation and Valero.
The Harvey-induced emergency releases of oil are rare — the first since 2012 — and small, representing a fraction of the nearly 680 million barrels of crude stored in reserve.
But experts say Harvey highlights the continued importance of the oil reserve, even in an era where the U.S. produces more of its own oil from fracking, and relies less on imports.
“Harvey hopefully will make some players think twice of this idea of selling off energy security assets to pay for the ongoing costs of running government,” said Chris Smith, who oversaw the Energy Department’s Office of Fossil Energy, which manages the oil reserve, under former President Barack Obama. “That is bad policy,” Smith told the Washington Examiner in an interview.
When Obama was president, Congress passed laws mandating the Energy Department sell about 140 million barrels of oil from the Strategic Petroleum Reserve to pay for deficit reduction, drug research, and highway spending.
“Congress is raiding the SPR, like breaking into a bank, using the cash for whatever they want,” said Bob McNally, former energy adviser to former President George W. Bush, in an interview with the Washington Examiner.
Smith said he and Obama opposed selling oil from the reserve for unrelated uses, but acquiesced to signing legislation backed by bipartisan margins in Congress.
President Trump’s 2018 budget proposal calls for a further drawdown of the oil reserve, seeking to sell about half of it, 270 million barrels, over the next decade to cut the deficit by $16.6 billion.
Lawmakers from both parties have opposed Trump’s plan as too extreme, and Harvey may exacerbate that feeling.
Nicole Daigle, a spokeswoman for the Senate Energy and Natural Resources Committee and its chairwoman Sen. Lisa Murkowski, R-Alaska, suggested Harvey will strengthen opposition to further reductions to the oil reserve.
“Hurricane Harvey is a good reminder that it is in our best interest to maintain an appropriately-sized stockpile of emergency reserves to help protect against import and supply disruptions,” Daigle told the Washington Examiner in an email.
Congress created the Strategic Petroleum Oil Reserve 40 years ago as a response to the Arab oil embargo, as the U.S. faced an economically threatening disruption in oil supply. Oil in the reserve is stored in four underground sites along the coastline of the Gulf of Mexico.
The U.S. most recently authorized a sale from the reserve in 2012 after Hurricane Isaac. It was also tapped after Hurricane Katrina in 2005.
The oil reserve is intended to shield against global supply disruptions, which is less problematic for the U.S. because it is not as dependent on Middle Eastern suppliers, with domestic oil production surging in recent years.
But supporters of the reserve say it remains useful, as weather storms become more frequent and powerful.
“Even if we produce more oil in the U.S., when prices spike, it hits the U.S. economy and it hits the pocketbook of American families,” Smith said. “Importing fewer barrels doesn’t mean the protection the SPR gives us is any less relevant. This is the nature of insurance. When you are in a moment of calm, it feels expensive, but when you need it like we are seeing right now, having flexibility has real value.”