WASHINGTON, D.C.—Senators Susan Collins (R-ME) and Carl Levin (D-MI) today released a Government Accountability Office (GAO) report which states that the Department of Energy wasted hundreds of millions of dollars in filling the Strategic Petroleum Reserve (SPR), and that the current SPR may be insufficient to protect the United States against a severe supply disruption caused by a variety of international events, including an Iranian oil embargo or a terrorist attack on the Saudi Arabian oil supply.
This GAO report concludes that the U.S. Department of Energy could have saved taxpayers nearly $600 million since 2001 if the Department had developed and used cost-effective procedures for filling the SPR, as Senators Collins and Levin have recommended in the past.
"This report confirms what Senator Levin and I have been saying for years: that DOE can save hundreds of millions of dollars and help mitigate energy price spikes through the proper use and maintenance of the SPR,” said Senator Collins. “Instead, DOE ignored its own experts' advice and pursued an inflexible policy that cost taxpayers nearly $600 million while failing to provide energy price relief at those times when it was most needed."
“GAO recommends that the Department of Energy use a more flexible, market-oriented strategy for filling the SPR, based on the principle of buying more oil when prices are low and less when prices are high,” said Senator Levin. “This common sense strategy is exactly what I and Senator Collins have been urging DOE to do for several years now. Adopting this approach would save taxpayer dollars, make the SPR more cost-effective, and keep oil on the market when supplies are tight. It would stop the current SPR practice of buying oil at any price. It is past time for DOE to adopt these common sense, cost-effective recommendations.”
Senators Collins and Levin have long called on DOE to do a better job of filling and managing the reserve in order to maximize our overall domestic supply of oil while minimizing the cost to taxpayers and the impact on consumers. Levin and Collins authored a successful amendment, which became law as part of the Energy Policy Act of 2005, requiring DOE to develop procedures for filling the reserve in order to avoid adversely impacting consumers, reduce costs to the U.S. Treasury, and maximize our supplies of oil.
The GAO report also states that the SPR is "insufficient" to replace the oil lost from a severe supply disruption, including a global Iranian oil embargo, Strait of Hormuz closure, or a shutdown of the Saudi oil fields due to terrorism. The report notes that an Iranian embargo could cause oil prices to increase by $16 per barrel and up to $200 billion in GDP damage to the US economy, of which $132 billion could be offset by the SPR. A Strait of Hormuz closure could cause oil prices to increase by $175 per barrel. A Saudi shutdown could cause $832 billion in damage to the US GDP, of which only $77 billion could be offset by the SPR. Furthermore, the report noted that as consumption increases and our reliance on foreign oil increases, the reserve will have a diminishing ability over time to address oil shocks.
Currently, the SPR can store up 727 million barrels of crude oil. The Energy Policy Act of 2005 authorizes the reserve to be increased to one billion barrels.
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