Quick question, who has sold just over 11 million barrels of crude oil into the market since the beginning of March?
Answer: The United States Strategic Petroleum Reserve ("SPR").
Many people are aware of the United States Strategic Petroleum Reserve, established by President Gerald Ford in late 1975 in response to OPEC's oil embargo, and the economic damage it caused to the U.S. economy. Storage capacity is rated for 713.5 million barrels, with current inventory of just over 683 million barrels at an average cost of $29.70 per barrel.
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The SPR has been used several times as a price buffer over the years, providing a source of protection during times of global upheaval. In 1991, President George H.W. Bush ordered an emergency release of 21 million barrels ("MMbbls") to support Desert Storm. A 30 MMbbl drawdown was initiated during the Arab Spring (2011) in cooperation with an additional 30 MMbbls supplied from other global stockpiles. Smaller releases have taken place in response to hurricanes impacting the U.S. Gulf of Mexico (11 MMbbls were made available after Katrina).
The SPR has been used to ease economic pain as well. President Bill Clinton authorized the release of 30 MMbbls to provide economic relief from high gasoline prices and low heating oil supplies in 2000, after 28 MMbbls were sold in 1996-1997 for deficit reduction purposes.
Which brings us to today. Let's recap the genesis…