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The Corner

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Strategic Petroleum Reserve -- For Emergency Use Only



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Last week, a group of congressmen led by Peter Welch (D., Vt.) urged President Obama to tap into the Strategic Petroleum Reserve (SPR) in order to “combat speculators capitalizing on the fear in oil markets,” which is apparently their theory of why gasoline prices are rising. The U.S. Senate Republican Policy Committee has just come out with a fantastic paper on the madness of using SPR drawdowns in non-emergencies. Letting the administration use the SPR whenever the fancy strikes totally defeats the “strategic” purpose of the reserve and would compromise national security in the long run. It would also give the administration an Hugo Chavez–style checkbook on the U.S. Treasury’s account, which the president can use for political advantage as need be.  

And another thing: An SPR drawdown for the congressmen’s stated purpose would be completely illegal.  

All three times presidents have drawn on the SPR could at least nominally be linked to an actual “interruption” in the oil supply. The January 1991 drawdown was meant to make up for the loss of Iraqi oil as a result of the Gulf War embargo. The 2005 drawdown was done when Hurricane Katrina knocked critical offshore oil rigs and refineries offline. The June 2011 drawdown was different because, though the Libya conflict reduced Libya’s production, the disruption had occurred months before, had affected southern Europe almost exclusively, and oil production from other parts of the world had already made up the shortfall, pushing oil prices back towards pre–Arab Spring levels. At the time it was slammed as politically motivated: It set a bad precedent, weakened the SPR, and threw away a lot of taxpayer money in the process.  But at least there had been some interruption of supply somewhere on the planet.  

A drawdown on the SPR in today’s circumstances, however, would not even pay lip service to a supply disruption somewhere. In fact, Congressman Welch and his colleagues believe that the SPR should be used to protect the global price of oil from “speculators.” Leaving aside the economic nonsense of this justification, the law is quite clear that using the SPR for this purpose is prohibited. The relevant provisions of the Energy Policy and Conservation Act, codified at 42 U.S.C., make it clear that the SPR can only be used in case of a “severe energy supply interruption” and 42 U.S.C. Sec. 6234(f)(1) makes it clear that drawdowns are “prohibited” for any other purpose. 42 U.S.C. Sec. 6241 provides that, except as provided by treaty, such drawdowns require a presidential finding of a “severe energy supply interruption” arising from an “emergency” situation that has resulted in a “significant reduction in supply.”  42 U.S.C. Sec. 6202(8)(c) further clarifies that the “severe energy supply interruption” may arise from an interruption in foreign supply, an interruption in domestic supply, “sabotage, or an act of God.” 

Federal law clearly prohibits a drawdown on the SPR simply because oil production fails to keep pace with increased demand.



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