President Donald Trump held a press conference last Friday to declare a national emergency and announce a series of measures designed to combat the coronavirus, COVID-19. One key measure Trump announced was his direction to Secretary of Energy Rick Perry to purchase of “large quantities” of oil for the United States Strategic Petroleum Reserve given the low-cost and ongoing volatility.
The Strategic Petroleum Reserve was created in 1975 following oil supplies were interrupted during the 1973–1974 oil embargo to mitigate future supply disruptions and provide a cushion against unexpected price spikes. Although other nations have their own reserves, the United States is the world’s largest supply of emergency crude oil. Maintained by the Department of Energy it is located in underground salt caverns along the coastline of the Gulf of Mexico in Louisiana and Texas. The Reserve has a capacity of 727 million barrels, but as of September 6, 2019, the oil reserves totaled 644.8 million barrels.
Emergency releases of the reserve have only happened three times in history. In 1991 at the beginning of Operation Desert Storm, the United States announced the emergency sale on the day the war broke out in the Persian Gulf to assure our allies of the adequacy of global oil supplies. In September 2005, after Hurricane Katrina halted the oil production, distribution, and refining industries in the Gulf regions of Louisiana and Mississippi. In June 2011, the United States released 30 million barrels in response to crude oil supply disruptions in Libya and other countries.
Bolstering the Strategic Petroleum Reserve is a critical tool for the United States to effectively navigate geopolitics and provide energy security. Additionally, this move will offer relief to the oil and gas industry, which has suffered significant losses as countries around the world shutter business to wait out the coronavirus. In light of the ongoing oil war between Saudi Arabia and Russia, this decision was a key strategic move by the administration to bolster American energy security for its consumers and our allies.