Why the U.S. keeps millions of barrels of oil in caves?

In salt caves almost a kilometer below the surface, on the coasts of Texas and Louisiana, the U.S. holds one of its greatest treasures for turbulent times: millions and millions of barrels of oil. These are not new fields or wells explored or yet to be explored. Crude oil was brought there and is meticulously preserved year after year.

It is the U.S. Strategic Petroleum Reserve, the largest emergency oil depot in the world and which, these days, once again shows its importance. On Sunday, President Donald Trump authorized, for the fourth time in history, the use of reserves to avoid an oil crisis after attacks against Saudi refineries.

"On the occasion of the attack on Saudi Arabia, which may have an impact on oil prices, I authorized the release of oil from the Strategic Reserve, if necessary, in an amount to be determined sufficient to keep the markets well supplied," he wrote on Twitter.

Last Saturday, an attack coordinated with drones affected the facilities of the Aramco oil company, the largest in the world, which led it to cut its production by more than half. The unexpected reduction in a country that exports 5% of the crude consumed around the planet put the markets in a state of nervousness and triggered more than 10% of the world price of oil.

Uncertainty led to a drop of more than 165 points in the Dow Jones Industrial Index, in the face of fears that the rise in prices could be maintained despite promises by OPEC and Russia to increase production. Hence, Trump's decision to resort to oil funds stored off the Gulf of Mexico coast if necessary was seen not only as a strategy to contain potential fuel growth, but also to calm markets.

What are these reserves and why are they so important to the United States?

The origin of the reserves is to be found in another crisis that also originated in the Persian Gulf, Jorge Piñón, director of the Energy Program for Latin America and the Caribbean at the University of Texas, told BBC Mundo. Then, in 1973, it was not an attack that almost left the U.S. without oil. "What happened was that the Arab countries blocked the export of crude oil to the West because of the support that the United States and others were giving Israel. This led to a very delicate situation, given the United States' dependence on oil," Piñón recalls.

In October 1973 Syria and Egypt had been embroiled in the so-called Yom Kippur War against Israel, in which Jews received support from the United States and other nations, such as the Netherlands. The Arab countries, in retaliation, decided to cut off their exports to the West. The war lasted only three weeks, but the embargo lasted until March 1974, which caused crude oil prices to quadruple worldwide: from around US$3 to almost US$12 per barrel. It was, according to historians, the world's first oil crisis. The global economy suffered a hard blow and the United States did not escape.

Life became chaotic in the emerging cities that had begun to emerge after World War II: millions of people needed to line up at gas stations and much of the U.S. industrial infrastructure, based on the premise of cheap fuel, began to be threatened. The impacts were felt many years later, and in 1975, three days before Christmas, then-President Gerald Ford signed into law the first emergency U.S. crude oil depot for exceptional cases.

Thus was born the Strategic Reserve whose importance since then was such that only the president of the United States has the power to authorize the use of oil that is kept there. According to Piñon, the reserve is stored in four locations in the Gulf of Mexico, each located near a major refining and petrochemical processing center. They are located near Freeport and Winnie, Texas, and outside Lake Charles and Baton Rouge, Louisiana. "They are a kind of artificial cavern created in salt domes below the surface," he says.

The immense warehouses composed each of a network of caverns were located between 500 and 1,000 meters below sea level, making it cheaper to store the oil in tanks on the surface and also safer: the chemical composition of the salt and the pressure prevent the oil from leaking. Each cavern has an average size of 60 meters in diameter and a capacity to hold 6 million to 37 million barrels each.

According to data from the U.S. Department of Energy, these warehouses currently have 645 million barrels inside, although the maximum storage capacity is somewhat higher: 713.5 million. According to official data, Americans used an average of 20.5 million barrels of oil per day in 2018, which means that reserves could keep the country running for about 31 days. However, once the president authorizes their use, it can take up to 13 weeks for the oil from the reserves to reach the markets. So far, U.S. presidents have rarely authorized the use of reserves.

The last of these took place in 2011, when the Arab Spring uprisings led the member states of the International Energy Agency to release a combined total of 60 million barrels to palliate the disruption of global oil supply. Earlier, in 2005, it was also ordered for use after Hurricane Katrina devastated U.S. oil infrastructure along the Gulf of Mexico. Its first use took place in 1991 when the United States attacked Iraq in Operation Desert Storm. However, the utility of maintaining such a large reservoir at a time when U.S. energy production is booming has been questioned in recent years.

The U.S. is currently the world's largest crude oil producer

"We produce 12 million barrels per day, compared to 11 million from Russia with and 10 million from Saudi Arabia. So this has led some to question whether reserves should be maintained," says Piñón. A report by the Government Accountability Office in 2014 suggested getting rid of that oil to lower fuel prices and, in 2017, the Trump government considered selling half of the reserves to help address the federal deficit.

However, one issue that has rethought that idea is that the country still needs to import crude oil: an average of 9 million barrels each day.  "The point is that although the U.S. now produces much of the oil it consumes, it continues to import crude oil and that confronts us with possible risks, including some that you don't even imagine like this that just happened with the drones, which is an entirely new threat," Piñón said.

Source: BBC