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SPR Should Not Be Used To Manipulate

Read Time: 3 mins

The Strategic Petroleum Reserve (SPR) should not be used to manipulate the crude oil market or product markets.

That is the long-held view of the Independent Petroleum Association of America (IPAA), the organization’s CEO, Jeff Eshelman, highlighted in a statement recently.

“It should be a safety net in case of disruption of crude oil supplies. Policy makers should oppose all non-emergency sales of oil,” Eshelman said.

“We strongly oppose the use of oil stockpiles to affect gasoline prices. Market interference makes us all more vulnerable and is counterproductive to long term adjustments in the marketplace. A better solution is to enhance, not stifle or shut-down, America’s leadership in natural gas and oil production,” the IPAA chief operating officer stated.

If the government regularly released SPR oil for sale each time domestic fuel prices rose, it could reduce the country’s ability to address a situation with the potential to seriously injure the U.S. economy, Eshelman noted. In addition, a draw-down of the reserve might not have the desired result, he added.

“The sale of SPR oil now could destabilize the fragile oil market. After eighteen months of historically low oil prices that devastated the domestic oil and natural gas industry, oil prices have now returned to the levels they were pre-pandemic,” Eshelman said.

“However, the sale of SPR oil at this time when supplies are adequate to meet domestic needs could easily undermine the market and drive the domestic industry back into economic turmoil,” he continued.

Over the past few days, several members of congress have urged the White House and the department of energy to sell oil from the SPR, Eshelman highlighted.

In a statement sent to Rigzone earlier this week, Rystad Energy’s senior oil markets analyst Louise Dickson outlined that an SPR release would “likely only have a temporary bearish effect on prompt prices and is not a lasting solution for an imbalance between supply and demand”.

In a separate statement sent to Rigzone last week, Rystad Energy’s head of oil markets, Bjornar Tonhaugen, highlighted that OPEC+’s decision to keep its supply policy intact increased the chance of the U.S. and China intervening in the physical market, including tapping of their strategic crude reserves.

The SPR is the world’s largest supply of emergency crude oil and was established primarily to reduce the impact of disruptions in supplies of petroleum products and to carry out obligations of the United States under the international energy program, according to the U.S. Department of Energy. The federally owned oil stocks are stored in underground salt caverns at four sites along the coastline of the Gulf of Mexico.

Established in the aftermath of the 1973-74 oil embargo, the SPR has a maximum nominal drawdown capability of 4.4 million barrels per day, the DOE highlights.

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