When gasoline prices surge, most people blame oil companies, pipelines, or global demand. What rarely enters the conversation is the massive stockpile of oil governments keep underground for moments exactly like this.
Buried in salt caverns along the Gulf Coast sits one of the largest energy reserves on earth: the United States Strategic Petroleum Reserve.
Created in 1978 after the oil shocks of the 1970s, the SPR was designed to prevent the country from being crippled by sudden disruptions in energy supply. Instead of relying entirely on the market, the government built a massive emergency reserve capable of storing more than 700 million barrels of crude oil.
Today, the system consists of underground storage facilities along the Texas and Louisiana Gulf Coast. These sites can hold roughly 727 million barrels, making the SPR one of the largest emergency oil reserves ever created. At its peak, the reserve held 726.6 million barrels, nearly its full capacity.
The purpose of the reserve is simple. If a crisis disrupts global supply, the government can release oil into the market to prevent shortages and slow the rise of gasoline prices.
But the SPR is not only used during emergencies. Because some of the crude stored in the reserve has been sitting underground for decades, the government periodically sells older barrels and replaces them with newer supply. These transactions are conducted through what are known as exchange sales.
Under this system, the executive branch can authorize scheduled releases of oil from the reserve. Historically, the government has sold up to 20 million barrels per year, usually divided into two transactions of 10 million barrels each.
Congress can also authorize emergency exchange sales, which are used during periods of crisis or when policymakers believe intervention is necessary to stabilize the energy market. Unlike routine exchanges, emergency releases have no fixed limit. The amount of oil released depends entirely on the situation.
Oil companies must compete for these barrels through a bidding process before purchasing crude from the reserve.
Over the years, the Strategic Petroleum Reserve has been used repeatedly to respond to disruptions in energy supply.
In 2008, for example, the reserve held roughly 707 million barrels. After Hurricanes Gustav and Ike disrupted energy infrastructure along the Gulf Coast, emergency exchanges reduced the reserve by approximately 5.4 million barrels to maintain supply.
More recently, the SPR became a tool to address rising gasoline prices.
In November 2021, Congress authorized the release of 50 million barrels to help reduce the cost of fuel. In February 2022, another 30 million barrels were released. A few months later, in May 2022, the United States authorized the largest drawdown in the reserve’s history: 180 million barrels, delivered at a pace of one million barrels per day for six months.
These releases illustrate how governments can use strategic reserves not only during natural disasters but also during periods of inflation or geopolitical tension.
There is, however, an important constraint.
When oil is removed from the Strategic Petroleum Reserve, it must eventually be replaced. In most cases, the government has roughly twelve months to repurchase the barrels and replenish the reserve.
This creates financial risk. If the government sells oil at $100 per barrel and prices rise to $105 before it repurchases the supply, taxpayers absorb the loss. If prices fall, the government buys the oil back at a lower cost and benefits from the difference.
Today, the Strategic Petroleum Reserve remains a central instrument of global energy policy.
Because supply through the Strait of Hormuz, one of the world’s most critical oil shipping routes, is tightening, the United States and the International Energy Agency, composed of 31 countries plus the USA, are preparing another coordinated intervention.
Together, they plan to release approximately 400 million barrels of oil from strategic reserves worldwide. Of that amount, roughly 172 million barrels will come from the U.S. Strategic Petroleum Reserve.
The last major release occurred during the Russia-Ukraine war, when 180 million barrels were released over a six-month period in order to stabilize global energy markets.
Any new release will once again trigger the same requirement: the oil must eventually be repurchased to refill the reserve.
Every intervention in the oil market, therefore, is not only a response to present conditions. It is also a future financial commitment.
When governments open their oil reserves to calm markets today, they are also making a bet on what the price of oil will be tomorrow.
Bobb Rousseau, PhD
Bobb Rousseau