An Oil Insurance Policy That May Lapse

Abstract

The Strategic Petroleum Reserve, if filled, will consist of at least 750 million barrels of crude oil stored in Gulf Coast salt domes. It could be the only buffer between the United States and an economic disaster in the event a large part of US oil imports were cut off. Congress has appropriated $7 billion for the reserve since early 1975. It is estimated a total cost of the oil needed to fill the reserve at $19 billion. With a full reserve, the immediate response to a severe shortage would be to start moving crude from the salt dome storage facilities into the pipelines and fleets of coastal tankers that regularly deliver oil to most of the nation's refineries. The vital infusion of oil could be maintained for a half year or longer, thus giving the President a better chance to bring about a resumption of the flow of imports by careful diplomacy or other means. There is less than 90 million barrels of oil in storage today and the flow of oil into the reserve has been drying up. Because of US foreign policy commitments and the possible difficulty of filling the reserve with reducing supplies of petroleum productsmore » demanded by consumers, the reserve may go begging. No oil has been purchased for the reserve since late last year. For the reserve to be filled to its planned capacity by the end of 1986, 250,000 barrels of oil a day must begin flowing into it by November, with this rate to be maintained day in and day out for the next 7 years.President Carter has not mentioned the strategic reserve in any of his energy statements since July. The future of the reserve program looks bad. The best chance that the reserve will be filled may lie in the gradual increase in the price of gasoline and other petroleum products resulting from the rising cost of imported oil and the phased decontrol of domestic crude oil prices. (DP)« less