# What happens when oil is release from the strategic oil reserve?
**URL:** https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974
**Category:** Factual Questions
**Created:** [May 24, 2022, 3:53am UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974 "2022-05-24T03:53:13Z")
**Posts on this page:** 19
**Page:** 1
### Author:  [@elfkin477](https://boards.straightdope.com/u/elfkin477)
#### Post date: [May 24, 2022, 3:53am UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/1 "2022-05-24T03:53:13Z")
I’ve been googling for a while and I can’t find the answer to what I want to know, so…
Ok, so the president authorizes a release from the strategic oil reserve, say a million gallons a day. What happens to the oil? What I’m getting at is how does this oil make its journey into our gas tanks? Do the oil companies and/or gas stations get paid to refine or sell this oil somewhere along the way, on the tax payers’ dime?
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### Author:  [@Snarky\_Kong](https://boards.straightdope.com/u/Snarky_Kong)
#### Post date: [May 24, 2022, 3:57am UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/2 "2022-05-24T03:57:46Z")
The government sells it to oil companies.
> **[DOE Announces Sales From Strategic Petroleum Reserve to Combat Putin's Price...](https://www.energy.gov/articles/doe-announces-sales-strategic-petroleum-reserve-combat-putins-price-hike)**
>
> DOE Issues Contract Awards For 30 Million Barrels of Crude Oil, Announces Plan For Third Emergency Sale to Address Continued Market and Supply Disruptions Related to President Putin’s War on Ukraine
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### Author:  [@Si\_Amigo](https://boards.straightdope.com/u/Si_Amigo)
#### Post date: [May 24, 2022, 1:12pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/3 "2022-05-24T13:12:08Z")
So when does the government stop buying oil for the strategic reserve? At a certain price level? When they have filled there holding facilities?
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### Author:  [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)
#### Post date: [May 24, 2022, 2:30pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/4 "2022-05-24T14:30:00Z")
I don’t recall the last time the government actually bought oil for the reserve so the question of when the government stops buying is ‘whenever the government decides to stop’. Otherwise, in theory there’s a consistent fill spread out over several years/decades until the caverns are totally filled.
I’m also not even sure it’s ever really been ‘full’. I suspect not, or if so, not for all that long.
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### Author:  [@kanicbird](https://boards.straightdope.com/u/kanicbird)
#### Post date: [May 24, 2022, 2:45pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/5 "2022-05-24T14:45:00Z")
I recall they have bought it at some times when the price was very low. Clinton did that IIRC and Trump also bought some, though Trump claimed he filled it ‘to the brim’ when he did no such thing and missed out at a golden point of taking lots of oil at negative cost (getting paid to take oil) during the pandemic, but he did add to it. I think it’s more of if it looks like we have enough it falls off the radar to fill it further.
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### Author:  [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)
#### Post date: [May 24, 2022, 2:47pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/6 "2022-05-24T14:47:48Z")
> [@kanicbird](#):
>
> and missed out at a golden point of taking lots of oil at negative cost (getting paid to take oil) during the pandemic,
Prices were negative for less than a day, so I’m not sure where this is coming from.
Nobody was going to make any deal to sell millions of barrels of oil at a negative price. Even the whiff of any such deal would have sent prices skyrocketing not just back to ‘normal’ (which was ~$20-$30 IIRC the day before AND the day after things went negative) but higher than that.
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### Author:  [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)
#### Post date: [May 24, 2022, 6:51pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/7 "2022-05-24T18:51:33Z")
> [@Snarky\_Kong](#):
>
> The government sells it to oil companies.
by “oil companies”, if you mean refiners, then you would be correct.
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### Author:  [@bump](https://boards.straightdope.com/u/bump)
#### Post date: [May 24, 2022, 7:09pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/8 "2022-05-24T19:09:06Z")
Don’t they just sell it on the domestic market to whoever buys, which would presumably be refiners, because they’re the only ones with any use for crude oil?
That seems like the best way to influence commodity crude oil prices.
Here’s a recent update on how purchasing is done:
[DOE Announces Long-Term Buyback Plan Ensuring Continued Availability of Strategic Petroleum Reserve | Department of Energy](https://www.energy.gov/articles/doe-announces-long-term-buyback-plan-ensuring-continued-availability-strategic-petroleum)
Here’s some more info:
[Strategic Petroleum Reserve Fact Sheet\_3.31.22.pdf (energy.gov)](https://www.energy.gov/sites/default/files/2022-04/Strategic%20Petroleum%20Reserve%20Fact%20Sheet_3.31.22.pdf)
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### Author:  [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)
#### Post date: [May 24, 2022, 7:30pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/9 "2022-05-24T19:30:12Z")
> [@bump](#):
>
> Don’t they just sell it on the domestic market to whoever buys, which would presumably be refiners, because they’re the only ones with any use for crude oil?
Yes that is correct. By increasing the supply of crude that is available to be purchased by refiners, the price should come down, which would therefore increase the supply of gasoline produced which should therefore reduce the price of gasoline at the pump.
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### Author:  [@Riemann](https://boards.straightdope.com/u/Riemann)
#### Post date: [May 24, 2022, 7:55pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/10 "2022-05-24T19:55:37Z")
> [@kanicbird](#):
>
> Trump claimed he filled it ‘to the brim’ when he did no such thing and missed out at a golden point of taking lots of oil at negative cost
I was about to question this, but I just learned something. I didn’t realize that the strategic reserve actually consisted of giant physical tanks in underground caverns - I assumed that long term storage like this was impractical. I mean, obviously in crude form it has been in the ground for millions of years, but normal gasoline degrades. What exactly is exactly is it that we keep in these giant tanks?
Given that it’s a static physical reserve, I think you are probably correct - the only reason the price went negative was because there was just nowhere to put it. You’d think topping up the strategic reserve would be the obvious thing to do in that situation.
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### Author:  [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)
#### Post date: [May 24, 2022, 8:10pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/11 "2022-05-24T20:10:35Z")
> [@Riemann](#):
>
> What exactly is exactly is it that we keep in these giant tanks?
Crude, for the most part. They aren’t really ‘tanks’ but large underground salt caverns. These are a pretty good way of storing crude (salt being impermeable to oil - digging through salt to get to petroleum traps underneath is pretty common). Some light, sweet crude but a lot of what we store is also heavy, sulfur rich crude, which our refineries are pretty good at handling.
There are some plans to possibly store refined products in the future, but facilities would need to be built.
> [@Riemann](#):
>
> Given that it’s a physical reserve, I think you are probably correct - the only reason the price went negative was because there was just nowhere to put it.
But not by that much - a few thousands barrels one way or the other (as happened …within a few hours) and the price flips positive again. I just looked this up and the WTI spot price closed on Friday, Apr 17 at just over $18, on Monday Apr 20 at -$36 and on Tuesday Apr 21 at just over $8 and then continued to rise to get to about the ~$40 level in about a month.
The suggestion that we could have had other people pay to take enough oil off their hands to fill the SPR is absurd. At most, people may have agreed to take a small amount off their hands because there was nowhere else to put it (actually there was still capacity but some people with longer-term positions were getting antsy about deliveries into the future and willing to take a small hit at the moment), but if even 5000 barrels had been sold at a negative price to the SPR, that would have been enough to calm things down and get people trading at positive prices again - something that happened the very next trading day anyway. No trader in their right mind would have sold a million barrels of crude at those prices.
At no point was there a realistic chance that a meaningful refill of the SPR would have been achieved at such low prices. That is something that is not the fault of Trump or the DOE.
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### Author:  [@Martin\_Hyde](https://boards.straightdope.com/u/Martin_Hyde)
#### Post date: [May 24, 2022, 8:13pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/12 "2022-05-24T20:13:24Z")
Yes–most oil and gas storage facilities in the United States, at least the large scale ones, do not use any sort of manufactured, buried storage, they use impermeable underground “caverns” / void spaces, often times ones that previously held oil, and pump into them. (There is a lot of natural gas storage in the country as well that uses similar caverns, but I don’t believe there is a government version of that, natural gas storage is operated by private companies that sell natural gas storage services.)
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### Author:  [@Riemann](https://boards.straightdope.com/u/Riemann)
#### Post date: [May 24, 2022, 8:15pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/13 "2022-05-24T20:15:18Z")
> [@Great\_Antibob](#):
>
> The suggestion that we could have had other people pay to take enough oil off their hands to fill the SPR is absurd.
Yes of course, the blip negative was brief and the volume actually traded at negative price was tiny. But oil was cheap for a long time early in COVID when consumption collapsed. I think the broad point is still valid - you could certainly have bought millions of barrels below $30. But perhaps there were other logistical reason why it could not be done, we had a lot on our plate at the time.
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### Author:  [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)
#### Post date: [May 24, 2022, 8:20pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/14 "2022-05-24T20:20:51Z")
> [@Riemann](#):
>
> The broad point is still valid.
Sort of?
WTI was only trading under $40 for about 3-4 months at the beginning of the pandemic and full recovered to pre-pandemic levels (about $50 in Jan 2020) about a year later. That’s definitely a savings but a large government order is the kind of thing that can push prices back up faster. Releases from the SPR don’t knock prices down much but an announcement of an expected buy can prop them up. It’s asymmetric that way.
So maybe a 10% savings for a few million barrels but all the oil companies were betting on a recovery within 1-2 years anyway and traders wouldn’t be giving that kind of price for the majority of the oil that would be needed to refill the SPR. It’s not like they’d say “oh sure, we’ll sign a contract for 100 million barrels at today’s price but to be delivered over the next 5 years no matter if the spot price improves over that period”.
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### Author:  [@Riemann](https://boards.straightdope.com/u/Riemann)
#### Post date: [May 24, 2022, 8:25pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/15 "2022-05-24T20:25:26Z")
> [@Great\_Antibob](#):
>
> It’s not like they’d say “oh sure, we’ll sign a contract for 100 million barrels at today’s price but to be delivered over the next 5 years no matter if the spot price improves over that period”.
The futures contracts trade a long way out, and in pretty good volume. I remember looking at it when the front month when negative, and I think futures a long way out were below $30 for quite a while. I may be mistaken, I’ll try to find the data.
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### Author:  [@bump](https://boards.straightdope.com/u/bump)
#### Post date: [May 24, 2022, 8:51pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/16 "2022-05-24T20:51:37Z")
They’re not natural formations, at least not the actual storage chambers. They use hot water to dissolve them out from the salt domes, which are natural formations.
[Strategic Petroleum Reserve | Department of Energy](https://www.energy.gov/fecm/strategic-petroleum-reserve-4) (look under “How the SPR Storage Sites Were Created”)
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### Author:  [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)
#### Post date: [May 24, 2022, 9:11pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/17 "2022-05-24T21:11:09Z")
They also make for really good archive storage. The whole Gulf coast region is unbelievably humid but that is no problem inside a giant salt dome. Great for old data storage - tape, paper, disks, whatever you want. There are some oil companies here in the Houston area that use defunct salt mines for that purpose.
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### Author:  [@Snarky\_Kong](https://boards.straightdope.com/u/Snarky_Kong)
#### Post date: [May 24, 2022, 9:29pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/18 "2022-05-24T21:29:57Z")
What’s the purpose of this post? I linked to a bunch of oil companies that bought from the reserve.
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### Author:  [@bump](https://boards.straightdope.com/u/bump)
#### Post date: [May 25, 2022, 3:16pm UTC](https://boards.straightdope.com/t/what-happens-when-oil-is-release-from-the-strategic-oil-reserve/964974/19 "2022-05-25T15:16:11Z")
I thought the big [storage in a salt mine was under Hutchinson, Kansas](https://www.sfgate.com/news/article/Treasures-Kept-Safe-in-Salt-Mines-Below-the-2778029.php)? I haven’t heard of anyone using any of the Gulf Coast salt domes for anything other than oil storage.