November 1, 2019
Response Options to Oil Supply Disruptions
The September 2019 oil infrastructure attacks in Saudi
Arabia temporarily disrupted production and processing of
approximately 6% of global crude oil supply. This resulted
in the largest single-day price increase over the last 10
years, as measured by West Texas Intermediate (WTI, the
U.S. domestic oil price benchmark). This effect on U.S.
domestic price levels from a temporary disruption in a
foreign country illustrates the integrated and global nature
of crude oil markets. Interruptions in oil supply could affect
the price of crude oil and petroleum products (e.g.,
gasoline). The volume and rate at which lost supply is
restored are key factors that contribute to the duration and
magnitude of price effect. Also, assured access to crude oil
is associated with energy independence and energy security.
There are two primary options to replace lost or interrupted
supplies: releasing stockpiles or using spare capacity. These
and other options may be of interest to Congress during a
crude oil supply disruption.
Many countries and private companies retain crude oil
supply stockpiles as well as product stocks like gasoline
and heating oil. Stockpiling oil supplies has been a practice
of government and industry for several decades.
Although many countries stockpile crude oil and petroleum
products, not all provide transparent or frequently updated
volume information. This unknown volume puts a
limitation on measuring the full scope of readily available
crude oil and petroleum products in response to a supply
disruption. For instance, in 2019, China’s National Energy
Administration announced storage of roughly 80 days’
worth of imports. Prior to this announcement, China had
not released numbers since 2017.
In a supply interruption emergency, the President can
authorize a release from the SPR and/or the IEA can call for
a coordinated release from IEA member countries. After the
September 2019 attacks on the Saudi oil infrastructure,
initially, as prices rose, the Trump Administration (under
EPCA authority) responded with an announcement to
authorize a release from the SPR. However, as prices
stabilized several days after the attacks, there was no
release. Further, the IEA has not announced any plans to
coordinate a release of strategic supplies (crude or
According to the IEA, a coordinated collective member
release from stocks has occurred three times: early in the
1991 Gulf War; after Hurricanes Katrina and Rita in the
Gulf of Mexico in 2005; and in June 2011, after political
unrest in Libya led to a production loss of 1.7 million
barrels per day (mb/d). At that time, crude oil prices were
trading above $100/barrel. Today, prices are stabilizing
under $70/barrel, and the United States is the top crude oil
producer in the world.
IEA members can use both public and commercial stocks to
meet their 90-day obligation. In June 2019, according to the
IEA, Organization for Economic Cooperation and
Development (OECD) members held around 1,122 million
barrels of crude oil in commercial inventories and 1,230
million barrels in government stocks (Figure 1). The
United States had 461 million barrels of commercial crude
oil stocks in June 2019, equaling around 711 days’ worth of
net imports when combined with SPR stocks, according to
the IEA’s methodologies.
Figure 1. OECD Crude Oil Stocks
June 2019, Millions of Barrels
International Energy Agency (IEA) and the
Strategic Petroleum Reserve (SPR)
One major public sector coordinated stockpiling effort
came about in response to the 1973 Organization of Arab
Petroleum Exporting Countries (OAPEC) oil embargo. The
United States entered into the International Energy Program
in 1974, an agreement implemented through the IEA that
requires all members to hold a 90-day supply of oil (based
on the previous year’s net imports) for emergency use.
The following year, Congress passed the Energy Policy and
Conservation Act (EPCA, P.L. 94-163), which authorized
the creation of the government controlled stock—the
SPR—to address emergency supply shortages. According
to the U.S. Department of Energy, as of September 27,
2019, the SPR’s inventory totaled approximately 645
million barrels of oil, meeting the IEA requirement.
Source: IEA, Oil Market Report, September 12, 2019.
Notes: Excludes non-OECD volumes. See source for details.
Response Options to Oil Supply Disruptions
Numerous oil industry firms hold commercial stocks of
crude oil at refineries, bulk terminals, and in pipelines. The
purpose of these stocks is to ensure the continuous
operation of the refining industry, which transforms crude
oil into petroleum products used by consumers.
Commercial stocks do not necessarily provide a level of
security proportional to that of the SPR. A certain amount
of oil held in the system is not likely to ever be drawn upon.
For example, in the case of oil in pipelines, some quantity
may be considered as “pipe fill” (i.e., oil required to keep
the pipeline system operable).
The role of the SPR continues to be a topic of debate for
Congress. Congress authorized the creation of the SPR to
meet IEA obligations to mitigate the effects of oil supply
disruptions. Some assert that using the SPR for emergency
supply disruptions should be its sole purpose. The SPR was
used in the three IEA-coordinated releases to date.
Others contend that commercial stocks meet IEA
obligations and Congress could authorize the SPR to meet
other needs. Since the 1970s, Congress has expanded the
role of the SPR to include natural disaster response and
economic stabilization. Hurricanes (e.g., Harvey 2017) have
resulted in drawdowns from the SPR to supply refineries
and aid consumers. Congress also has allowed various
economic drawdowns of the SPR known as mandated and
modernization sales. Proceeds from mandated sales are
deposited into the general fund of the U.S. Treasury.
Proceeds from modernization sales are required by law to
be used for construction and maintenance of SPR facilities.
Spare production capacity is potential oil production that
can brought to market within 30 days, and sustained for at
least 90 days, as defined by the U.S. Energy Information
Administration (EIA). Countries with the greatest spare
capacity are sometimes referred to as “swing producers.”
Spare capacity may enhance these countries’ oil market
The Organization of the Petroleum Exporting Countries
(OPEC), a group of 14 oil-producing nations, typically
holds enough spare capacity to influence the market when it
deems it necessary. According to the EIA, OPEC’s spare
capacity is generally around 2.3 mb/d (Figure 2).
Normally, Saudi Arabia keeps around 1.5-2 mb/d of spare
capacity, the majority of OPEC spare capacity.
Spare capacity in non-OPEC countries is difficult to
quantify as the definition of spare capacity can vary.
Further according to the EIA, non-OPEC countries typically
attempt to produce at full capacity and have limited spare
capacity. OPEC typically sets its supply target based on this
assumption of non-OPEC members, which is referred to as
the “call on OPEC.”
Issues for Congress include whether and how to affect
OPEC’s use of their spare capacity. In recent years, several
bills have been introduced to address OPEC’s influence in
the oil market. For example, the No Oil Producing and
Exporting Cartels (NOPEC) Act of 2019 (H.R. 948 and S.
370) would modify the Sherman Antitrust Act (15 U.S.C. 1
et seq.), criminalizing collective actions by foreign states or
persons that affect markets and prices for crude oil and
other commodities. Some contend that NOPEC may cause
unintended consequences. OPEC members may respond by
producing oil at full capacity, lowering prices. Low oil
prices may not be ideal for all U.S. stakeholders. For
example, some U.S. producers may find extraction of crude
oil uneconomic below a certain price.
Governments can use other measures to mitigate oil supply
disruptions. These include demand-side management tools,
such as fuel rationing, which were used in the 1970s in
response to the oil embargo. Another tool that may help
reduce U.S. demand for oil is the Renewable Fuel Standard.
However, some of these options may take time before
Figure 2. OPEC Spare Capacity
Millions of Barrels
CRS Testimony TE10040, The Strategic Petroleum Reserve, by
CRS Report R45493, The World Oil Market and U.S. Policy:
Background and Select Issues for Congress, by Heather L.
CRS Insight IN11167, Attacks Against Saudi Oil Rattle Markets, by
Michael Ratner, Christopher M. Blanchard, and Heather L.
CRS Report R42460, The Strategic Petroleum Reserve:
Authorization, Operation, and Drawdown Policy, by Robert Pirog.
CRS Recorded Event WRE00205, Oil Prices: Oil Supply and the
Potential for Price Volatility, by Phillip Brown.
CRS In Focus IF11186, No Oil Producing and Exporting Cartels
(NOPEC) Act of 2019, by Phillip Brown.
Source: U.S. EIA, Refinitiv, “What Drives Crude Oil Prices: Supply
OPEC,” accessed October 23, 2019.
Notes: Data though 2019 3rd quarter, last updated October 8, 2019.
Heather L. Greenley, Analyst in Energy Policy
Response Options to Oil Supply Disruptions
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