Analysis of Oil Withdrawal and Distribution Tests for the Strategic Petroleum Reserve

In response to a congressional request and concern that the Department of Energy (DOE) periodically test actual drawdown and oil sales from the Strategic Petroleum Reserve (SPR), GAO analyzed the feasibility, cost, and effectiveness of testing actual SPR operations and the possible impacts on oil markets of certain suggested scenarios. In addition, GAO provided views on factors that should be considered in designing a cost-effective SPR test and the utility of oil exchange arrangements between DOE and private firms to facilitate an SPR test.

GAO found that all of the suggested scenarios were feasible and within the SPR system's current drawdown/distribution capabilities and noted that, to provide maximum confidence in system reliability, the system should operate either at design capacity or at maximum sustainable capacity. GAO also found that: (1) although the costs of a combined sales/storage test would be higher than either a sale or storage test, cost effectiveness could be achieved in increased oil storage and decreased oil sales; (2) because of the lack of data on price relationships with supply and demand, the impact of SPR sales on the oil market remained uncertain; and (3) oil industry officials' support of private oil exchanges as part of possible test methodology would enhance test flexibility, duration, and demonstration value. However, GAO believes that SPR oil exchange methodologies should be analyzed further before any implementation is proposed.