Strategic Petroleum Reserve
The United States has used a number of different measures to address these kinds of sudden oil shortfalls and price spikes. One is the Strategic Petroleum Reserve (SPR), the world's largest emergency stockpile of oil, which now contains about 700 million barrels. Held in underground caverns along the coast in the Gulf of Mexico, the SPR has a 727-million-barrel capacity. The SPR rose out of the Energy Policy and Conservation Act of 1975, a U.S. energy law whose purpose was to reduce U.S. dependency on high-priced oil imported from politically unstable countries, to contend with energy shortage conditions, and to improve energy efficiency and conservation. This energy law authorized the stockpiling of up to 1 billion barrels of petroleum to tap into during energy emergencies. The impetus for establishing such an emergency oil stockpile was the 1973-74 oil crisis; the U.S. government saw the SPR as a way to sidestep similar future crises. The Energy Policy and Conservation Act gave the president of the United States the authority to withdraw crude oil from the SPR in response to an energy emergency and distribute it to oil companies by competitive sale.
The SPR has been drawn down twice. The first emergency drawdown of the SPR was authorized in January 1991, during the Persian Gulf War. In the middle of the effort to counter Iraq's invasion of Kuwait, the U.S. Department of Energy (DOE) implemented a plan to draw down and sell 33.75 million barrels of crude oil from the SPR because oil supplies were threatened. The drawdown proceeded on schedule, but world oil supplies and prices stabilized before the final sale, so the United States reduced the drawdown to 17.3 million barrels, selling them to 13 companies.
The second emergency drawdown was a response to the oil production disruption caused by Hurricane Katrina. President George W. Bush, acting in conjunction with the IEA, authorized a drawdown of crude oil from the SPR in September 2005. Secretary of Energy Samuel W. Bodman immediately authorized the sale of 30 million barrels of crude oil to U.S. markets. The DOE accepted the bids of five companies for a total sale of 11 million barrels.
Drawing from the SPR is one way the United States has attempted to minimize its vulnerability to oil shortages. However, because filling the SPR reduces the amount of oil available for current consumption, the SPR is controversial. For example, the Bush administration ordered the SPR filled to capacity in November 2001 in response to the threat to oil security posed by the September 11 terrorist attacks that year. When gas prices soared, 50 members of the U.S. House of Representatives requested that the president stop the filling of the SPR so that the amount of oil available for current use would increase and gas prices would stabilize. The president denied their request.
More recently, the secretary of energy was authorized to fill the reserve to its previously prescribed 1-billion-barrel capacity. This authority was granted by the Energy Policy Act of 2005, a statute more than 1,700 pages long that was passed by the U.S. Congress on July 29, 2005, and signed into law on August 8, 2005. Aside from authorizing the filling of the SPR, the law has been touted by its supporters as a comprehensive energy policy that tackles shortages in energy resources through such measures as developing alternative and renewable energy technologies to supplement the use of fossil fuels for energy. In January 2007, during the State of the Union address, President Bush asked Congress to expand the SPR even further than the Energy Policy Act of
2005 prescribed—to double its current capacity. In February 2007 the DOE announced expansion plans for two existing SPR storage locations and named a site in Mississippi where a new SPR storage location would be developed.
Another outcome of the 1973-74 oil crisis was that the United States joined other Western nations, including the United Kingdom, Germany, Canada, France, Spain, and Australia, in forming the IEA. The initial goal of the IEA was to coordinate the efforts of member countries during an energy crisis to maintain energy supply. Today the IEA's stated goal is to ensure the reliability, affordability, and environmental soundness of the energy supply in its member countries. The IEA uses energy intensity as an index to measure energy efficiency; an intensity is the energy used per unit of activity—for example, the gasoline used per mile driven by a car. The IEA has reported that as a result of declining energy intensities, significant energy savings began around the world in 1973, when the first oil "price shock" hit, and lasted through the mid- to late 1980s. The IEA concluded that the changes caused by the 1970s oil crises, including the revisions in energy policy that resulted from the crises, had a substantially greater impact on reducing energy consumption than energy conservation and efficiency policies implemented in the 1990s. Declining energy intensities, according to the IEA, led to significantly reduced energy costs since 1973, but the reductions in energy intensities have been much more modest since the late 1980s, so the rate of energy savings has slowed since then.21 According to the IEA, energy use for cars is much greater in countries with low fuel prices and there is a correlation between higher fuel prices and lower vehicle fuel intensity and travel per capita.
Another measure that the U.S. government has taken to deal with energy emergencies is to regulate the price of energy resources. In response to the 1979 oil crisis, for example, the Carter administration instituted price controls. However, the chief outcome of this decision was snaking lines at gas stations around the country. It has been proposed that Americans wasted up to 150,000 barrels of oil each day while their engines idled at gas stations.22 The Carter administration also attempted to encourage citizens to conserve energy at home. In a symbolic effort to encourage conservation, President Carter had solar power panels and a woodburning stove installed at the White House. His administration also proposed removing price controls imposed during the administration of the U.S. president Richard Nixon in response to the 1973 oil crisis.
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