The Strategic Petroleum Reserve Was Never Used Strategically

Alan ReynoldsPresident Biden plans to tap the Strategic Petroleum Reserve (SPR) for a  million barrels a day for six months, describing this as “awartime bridge to increase oil supply until production ramps up later this year. ”This is only the second time that the SPR has been used for the purpose Congress intended in 1975 – to counteract temporary spikes in the global price of oil due to cartel extortion or foreign wars. The first time was during the Gulf War, on January 16, 1991, when President George H.W. Bush announced the SPR would immediately begin selling up to 2.5 million barrels a day. On the following day ,The Washington Post reported, “The price of crude oil plunged by one ‐​third today, falling a  record $10.56 a barrel to levels not seen since last summer. The dramatic sell‐​off to $21.44 shocked traders and led several oil companies to announce immediate price cuts.” With the price falling below $20 (where it remained for eight years),the SPR ended up selling much less than expected, about 17 million barrels.The 1975 law establishing a  strategic reserve proposed drawing down as much as necessary if “there is a significant reduction in supply which… [results in a] severe increase in the price of petroleum products… likely to cause a major adverse impact on the national economy.” Aside from 1991, however, the SPR has onl y been rarely and gingerly used for various other purposes unrelated to oil prices, such as hurricane assista...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs