Photo provided by U.S. Department of Energy
The U.S. government has 726 million barrels of oil stashed away in giant salt caves in Texas and Louisiana. This is the Strategic Petroleum Reserve, a cache created after the oil embargo of the 1970s shook the American economy.
The basic idea: Oil plays a central role in our economy, and the supply is vulnerable to natural disasters and political upheavals. So we should have a few months worth of oil imports saved up for a rainy day.
But this leads to a difficult question: How do you define a rainy day? And, more to the point: Is it raining right now?
In the case of the Strategic Petroleum Reserve, we basically let the president decide. (There are pretty stringent rules for draining the reserve entirely, but there's a lot of flexibility for tapping just a portion of it.)
A handful of Congressemen have been saying in recent days that President Obama should turn on the spigot, in response to the sharp rise in oil prices we've seen in the past few weeks.
But in the past, presidents have been pretty reluctant tap the reserve.
"The message that people usually get is, we're only going to release it in case things get really bad," Robert Weiner, a George Washington University economist who has studied the reserve, told me.
The reserve holds about 75 days worth of U.S. oil imports. So tapping it can affect prices, but only in the short term. And prices were rising (though not nearly as quickly) even before the protests in North Africa started earlier this year.
"We have is rising prices due to recovery of demand," Paul Leiby, who studies energy policy at Oak Ridge National Lab, told me. "On top of that, we have a short term event. We need to decide how important it is to address the short-term event."
The U.S. sold oil out of the reserve after Hurricane Katrina, and during the first Gulf War, in the early '90s.
But the uprisings in North Africa and the Middle East, and the associated rise in oil prices, probably aren't enough — yet — to tap the reserve.
White House Press Secretary Jay Carney said earlier this week:
I wouldn't look to a price threshold. The issue here is disruption, is there a major disruption in the flow of oil. ... we are in discussions with oil-producing countries, as well as the [International Energy Agency], about the various options that are available in the global system to deal with a major disruption, should that occur.
So, according to Carney, the reserve is something to be used in case of a major disruption; his phrase "should that occur" suggests that, in the Obama Administration's opinion, we haven't yet seen a major disruption.
This speaks to one of the reasons presidents have been reluctant to tap the reserve: You don't want to spend your rainy-day oil fund just before the storm gets even worse.
"Libya is not a huge factor in the oil market," Leiby said. "It's not like Kuwait or the Saudis or any of these other guys going out. That's what people are worried about."