Friday, September 14, 2007

Melanie Kenderdine Lecture: US Strategic Petroleum Reserve

On the evening of Tuesday, September 11, the Energy Club hosted a lecture by Melanie Kenderdine on the topic of the US Strategic Petroleum Reserve. The lecture took a broad view of US petroleum security, but drew on a series of anecdotes from Ms. Kenderdine's years inside the DOE during the Clinton administration.

Interesting take-aways:

- The US Strategic Petroleum reserve has a capacity upwards of 700 million barrels -- for reference, that's enough petroleum to feed the world's entire demand for a little less than 10 days, or to supplant US petroleum imports for about 2 months. However, the rate at which petroleum can be pulled out of the SPR is just upwards of 4 million barrels per day. Legislation is in the works to expand SPR capacity to 1 billion barrels.

- The crude oil stored in the SPR can be tapped for a number of reasons -- to compensate for small supply disruptions (as "loans" to oil and petrochemical companies, with additional oil paid back as interest), for test sales (5 million barrels or fewer), and larger drawdowns (which can occur only with presidential authorization). Because of the requirement for executive authorization of large drawdowns, the SPR has become a strong political lever (particularly in the past decade). Apparently, there is a tendency in Washington to disregard DOE recommendations about SPR drawdowns until they become politically expedient.

- At one point during the Winter 2000 heating oil shortage, heating oil supplies had dropped as low as seven days' worth of heating oil. With a delay of 10 days in perceptible market responses, the US was at a very real risk of running out of heating oil. The only factor that prevented a heating oil runout was that the weather warmed up. Since then, the US has more fully developed a dedicated system of heating oil storage for the Northeast (the predominant region for heating oil use).

Also, see more info on the SPR from the DOE's official site.

Lecture slides will be posted soon!

-Eerik

5 comments:

Justin Anderson said...

Interesting. I am always curious about the default assumption of dependence on oil as a negative phenomenon. At some point is there such a thing as energy interdependence ? The negative connotations politically are obvious but what about the economics for buyer and seller country and the long term implications of sending anti-trade signals ?

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