SPR - Strategic Petroleum Reserve - release some now? Are you kidding me?

In a previous blog, I commented upon the number of lawyers operating our Congress (37% of Representatives and 60% of Senators).  On Wednesday, after OPEC failed? to increase production, Congressman Ed Markey (D-Mass. - J.D. earned in 1972) said that the US "must engage in a full-scale OPEC oil independence campaign in the long-term to reduce our dependence on foreign oil, and prepare to use the nations' Strategic Petroleum Reserve in the short-term if prices spike once again and threaten an already-teetering economy."  While I am all for a long-term energy policy, the SPR should not be used as short-term solution to what ails the economy.  According to his website (http://markey.house.gov, June 8, 2011 OPEC post), that is exactly what he wants to do.  On March 10, 2011, he introduced H.R. 1017, which would direct the Department of Energy to release at least 30 million barrels of oil from the SPR, and then replace it with refined product like gasoline or diesel fuel when prices are low to enhance the security and flexibility of the SPR.  This short-term solution will not decrease the price of gasoline enough to benefit a "teetering economy."  To be fair, Congressman Ed Markey is not the only Representative or Senator to call for the release of the SPR.  How useful is the SPR for these situations?

A few facts about the SPR need to be discussed.  First, according to the eia.gov website, the SPR currently holds approximately 727 million barrels of crude oil.  Second, according to the DOE website (http://fossil.energy.gov/programs/reserves/spr/spr-sites) all of the SPR storage sites are in deep, massive salt caverns underlying Texas and Louisiana coastline.  The caverns range in size from 6 to 35 million barrels in capacity; a typical cavern holds 10 million barrels and cylindrical in shape with a diameter of 200 feet and a height of 2,000 feet.  The reserve contains 62 of these underground caverns.  Third, SPR oil can be distributed through the interstate pipelines to nearly half of the 141 US refineries.

Source: http://fossil.energy.gov/programs/reserves/spr/spr-sites

So, how much oil is in the SPR as it relates to the people?  The EIA supplies weekly petroleum data to the market place every Wednesday at 10:30AM Eastern Time.  For the week ending June 3, 2011, crude oil input to refineries (141 refineries in the US) was 15.1 million barrels per day.  If we used the SPR to replace that 15.1 million barrels per day of supply, then we would deplete the SPR in 48 days.  This clearly is not a go short-term solution.

OK, that will not happen because we produce a portion of that - 5.6 million barrels of the 15.1 million barrels per day total, or 37%.  For the week, we imported a net of 8.6 million barrels, or 56% of our needs.  AGAIN, WE IMPORTED 56% OF OUR NEEDS.  If we used the SPR to replace our imports, then we would deplete the SPR in 85 days.  Again, this is no short-term solution.

If we were to use the SPR to replace what Libya is not producing, according to the EIA Libya Country Analysis Brief, an estimate of 1.8 million barrels per day, then we would deplete the SPR in 403 days.  Gasoline prices for the month of May averaged $3.96 per gallon.  Just for contrast, across the EU, the average cost of a gallon of gasoline is about $8.70 (most of which is tax).  The SPR should not be used for anything less than a catastrophic event, such as the bombing of the Saudi Ras Tanura or Jeddah refineries.

So, how long would it take to get Congressman Ed Markey's 30 million barrels of oil to be released, or 4% of the total SPR?  Refining capacity for the week ending June 3, 2011, was an average of 87.2 percent of operable capacity from our 141 US refineries (Gulf Coast was at 92.0% capacity - the high, and East Coast was at 71.0% capacity - the low).  The latest, highest operating rate was 95.8% in May of 2003 and the all-time high operating rate was in August 1998 of 99.9%.  Operating at the highest rates with high temperatures for a long period of time is never a good idea.  If we used 95% as a more sustainable rate, then the refining complex of 141 refineries with an operable refining capacity of 16.994 million barrels per day, then we can achieve a 16.1 million barrels per day capacity.  At current levels of refining, we could only add an extra 1 million barrels per day of capacity.  That means that assuming that the SPR could deliver oil to the refinery on day one, we would blast through that Congressman Ed Markey's 30 million barrels release in 30 days.  What kind of impact would that really have on prices?  Not much!

Think wisely and act rationally.