Release date: December 21, 2016  |  Next release date: December 29, 2016

Strategic Petroleum Reserve sales under recently enacted laws are expected to start in January 2017

The Department of Energy's (DOE) Office of Fossil Energy recently announced that it will sell crude oil from the Strategic Petroleum Reserve (SPR) as early as January 2017. The announcement came after a Continuing Resolution that included a provision for DOE to sell up to $375.4 million in crude oil from the SPR was enacted into law earlier this month. This sale is the first of several planned sales totaling nearly 190 million barrels (Figure 1) during fiscal years 2017 through 2025. These sales reflect provisions in several recent statutes, including sections 403 and 404 of the Bipartisan Budget Act of 2015 (BBA), the Fixing America's Surface Transportation Act (FAST Act), which became law in December 2015, and the 21st Century Cures Act (Cures Act), which became law earlier this month.

As the largest stockpile of government-owned emergency crude oil in the world, the SPR was established to help alleviate significant disruptions in oil supplies from events such as major geopolitical events affecting oil supply, severe weather, and unplanned production, transport, and delivery outages. Located in four storage sites along the Gulf of Mexico, the SPR holds more than 695 million barrels of crude oil as of December 16, or about 97% of its 713.5 million-barrel design capacity.

The following sales have been approved by Congress:

• Section 404 of the BBA included authorization for funding an SPR modernization program to support improvements deemed necessary to preserve the long-term integrity and utility of SPR's infrastructure by selling up to $2 billion worth of SPR crude oil in fiscal years 2017 through 2020. As part of the BBA, DOE was required to complete a long-term strategic review of the SPR to ensure it meets current and future energy and economic security goals and objectives. The review was issued in September 2016.

     The Section 404 sales volumes are based on an assumption of
     $50 per barrel. However, the actual final sales volumes will depend on
     how SPR decides to allocate the sales volumes across those years and
     the actual price of crude oil at the time of the sales. For the
     Section 404 sales, SPR must get an appropriation from Congress
      to approve its requested sales revenue target.

• Section 403 of the BBA mandates SPR crude oil sales for fiscal years 2018 through 2025 on a volumetric basis, rather than on a dollar basis as done in Section 404. The revenues from sales authorized under section 403 will be deposited into the general fund of the U.S. Department of the Treasury.


• The recently passed Cures Act calls for the sale of 25 million barrels of SPR crude oil for fiscal years 2017 through 2019. The first tranche of these sales is expected in late spring 2017.


• The FAST Act calls for SPR sales totaling 66 million barrels from fiscal years 2023 through 2025.

As a member of the International Energy Agency (IEA), the United States is obligated to maintain stocks of crude oil and petroleum products, both public and private, to provide at least 90 days of net import protection and to collectively participate in the release or sale of oil supplies to help balance a global shortage in the event of a severe energy supply disruption.

• Based on September 2016 levels of net crude oil and petroleum product imports, the SPR alone holds crude oil stocks equivalent to 141 days of import protection (Figure 2).


• The United States must be able to contribute to an IEA collective action based on its share of IEA oil consumption. This obligation can be met by any measure a member nation may choose, including release of strategic or commercial stocks or demand restraint. As of October 2015, the United States must be prepared to contribute 43.9% of the barrels released in an IEA coordinated response. The U.S. government relies on the use of the SPR to meet this requirement.

U.S. average regular gasoline and diesel retail prices climb

The U.S. average regular gasoline retail price rose three cents from the previous week to $2.26 per gallon on December 19, up nearly 24 cents from the same time last year. The Gulf Coast price rose nearly five cents to $2.05 per gallon, while the East Coast and Midwest prices each rose three cents to $2.29 per gallon and $2.19 per gallon, respectively. The West Coast and Rocky Mountain prices each rose one cent to $2.56 per gallon and $2.14 per gallon, respectively.

The U.S. average diesel fuel price rose three cents to $2.53 per gallon on December 19, 24 cents higher than a year ago. The Rocky Mountain price rose five cents to $2.50 per gallon, while the East Coast and Gulf Coast each rose four cents to $2.56 per gallon and $2.41 per gallon, respectively. The Midwest price rose three cents to $2.48 per gallon, and the West Coast price rose two cents to $2.79 per gallon.

Propane inventories fall

U.S. propane stocks decreased by 3.1 million barrels last week to 92.5 million barrels as of December 16, 2016, 5.1 million barrels (5.2%) lower than a year ago. Gulf Coast, Midwest, East Coast, and Rocky Mountain/West Coast inventories decreased by 1.3 million barrels, 1.1 million barrels, 0.6 million barrels, and 0.1 million barrels, respectively. Propylene non-fuel-use inventories represented 5.0% of total propane inventories.

Residential heating fuel prices increase

As of December 19, 2016, residential heating oil prices averaged $2.57 per gallon, up four cents per gallon from last week and 36 cents per gallon higher than last year at this time. The average wholesale heating oil price is $1.74 per gallon, up just over 2 cents per gallon from last week and nearly 60 cents per gallon higher than a year ago.

Residential propane prices averaged nearly $2.19 per gallon, up three cents per gallon from last week and 20 cents per gallon higher than a year ago. Wholesale propane prices averaged $0.77 per gallon, up two cents per gallon from last week and just under 35 cents per gallon higher than last year's price.

For questions about This Week in Petroleum, contact the Petroleum Markets Team at 202-586-4522.

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Retail prices (dollars per gallon)

	Retail prices	Change from last
	12/19/16	Week	Year
Gasoline	2.264	0.028	0.238
Diesel	2.527	0.034	0.243
Heating Oil	2.571	0.040	0.361
Propane	2.188	0.031	0.200

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Futures prices (dollars per gallon*)

	Futures prices	Change from last
	12/16/16	Week	Year
Crude oil	51.90	0.40	17.17
Gasoline	1.557	0.050	0.282
Heating oil	1.672	0.035	0.565
*Note: Crude oil price in dollars per barrel.

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Stocks (million barrels)

	Stocks	Change from last
	12/16/16	Week	Year
Crude oil	485.4	2.3	33.0
Gasoline	228.7	-1.3	8.2
Distillate	153.5	-2.4	2.2
Propane	92.539	-3.084	-5.099