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Tags Current Affairs

US emergency oil stash

Date: 20 November 2021 Tags: Miscellaneous


The US administration led by President Joe Biden is planning to tap into US Strategic Petroleum Reserve to reduce price.



Many large petroleum consumers of the world such as India and China have already used the reserve to control price.



  • The move is likely to reduce pressure on US oil prices that hit a seven-year high above $85 a barrel and also fend off criticism against the government for failing to control prices.

  • Biden is also expected to hit back at OPEC+ group for failing to increase their oil production in the global market.


Strategic Petroleum Reserves

  • The Strategic Oil Reserves were created in 1975 in response to the spike in oil as a result of embargo imposed by Arab countries.

  • The US economy took a big hit during that period. The reserve has been previously used during wars and also calamities like hurricane.


The storage

  • The reserve currently holds 606 million barrels of oil in underground caverns located at two locations along Louisiana and Texas.

  • The amount is enough to meet petroleum reserves of US for more than a month. A small heating reserve is maintained at the North-east region.


Strategic reserves in other countries

  • All International Energy Agency (IEA) countries are required to hold emergency reserves equivalent to 90 days of net oil imports. 

  • Countries such as UK, Australia, Japan, and Germany have such reserves. China had constructed such a reserve 15 years ago. India also holds such a reserve.

  • OECD governments currently hold more than 1.5 billion barrels of crude. It was enough for 15 days of global demand prior to the pandemic.


Releasing in market

  • After the presidential decision it can take only 13 days for the first oil to enter the US market, as the reserves are located near to major refineries.

  • The crude is sold through auctions. The companies are required to return the same amount along with interest.

  • Crude from reserves have been previously released three times. The most recent took place in 2011 during a war in OPEC member Libya.

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