Feasibility and Cost of Interim Storage for the Strategic Petroleum Reserve

As part of an ongoing study of options for building, holding, and using private oil stocks, GAO was requested to provide information concerning the feasibility and cost of interim storage for the Strategic Petroleum Reserve (SPR) managed by the Department of Energy (DOE).

GAO calculations indicate that an SPR fill rate of 300 thousand barrels per day beginning in fiscal year (FY) 1983 and continuing until the SPR contains 500 million barrels will require interim storage during FY's 1983-1985. The peak 1-year requirement will be approximately 69 million barrels in FY 1984. It was suggested that temporary storage in the form of steel tanks and tankers will probably be available at costs ranging from about $1.20 to $3.65 per barrel per year. Therefore, GAO estimates that an interim storage program to the goals mentioned, given the DOE estimates of future oil prices, would cost from about $0.7 billion to $1.1 billion over 4 years. These estimates include storage costs and incremental debt financing of both storage and accelerated oil purchases. In comparison to the present DOE plan, an interim storage program would result in budget additions in FY's 1983 and 1984 and reductions in FY's 1985 and 1986. Numerous studies have shown that emergency oil reserves can pay for themselves many times over in the event of an oil supply disruption. A larger SPR achieved sooner will increase the reserve's deterrent and insurance value during the next 3 years. Apart from any disruption during the next several years, accelerated SPR purchases could lead to a net economic benefit depending upon the future price of oil.