The strategic oil reserves in the United States will be enough for 12 years of quiet life with constant consumption rates. Is it a lot or a little? And why is the level of these stocks in the reports constantly changing? Who estimates volumes and how? Why are many people in the world interested in this data, including financiers? Let's try to figure it out.
Salt domes: the latest storage technology
Most storage facilities are located in oil producing regions: Texas, Louisiana and along the Gulf of Mexico, close to oil refining centers. Strategic oil reserves in the United States are stored in unique underground industrial facilities. These are brand new storage technologies that have invested about four billion dollars.
These are huge artificial underground cavities formed in place of natural salt domes. Through these domes, having previously drilled them, a large amount of water was pumped to dissolve the salt. The depth of some storages reaches one kilometer, and the volumes are millions of cubic meters. Everything is accompanied by the latest piping and tanker systems for oil transportation.
How it all started
The system of oil reserves in the United States was organized after the famous oil crisis of 1973. The arrangement of oil pipelines simplifies pumping oil in both directions: both to and from storage facilities. These stocks were very useful to the United States during the Persian Gulf War in 1991. It was for such situations that a reserve oil system was created: during the sharp jumps in hydrocarbon prices or a sharp increase in gasoline consumption. Against the backdrop of hostilities, this always happens.
As for hydrocarbon production, the United States has recently moved to second place in the world after Saudi Arabia, pushing Russia to third.
Store or sell?
In 2015, the US Senate made a fateful decision in the form of a new bill to sell one hundred million barrels of reserve oil during 2018–2025 in order to gain $ 9 billion from the sale. This amount was planned in the budget to finance new logistics projects related to the transport system.
Crude oil inventories are closely watched by self-respecting consulting agencies around the world, because reserve inventories are important for financial markets. The dependence of oil prices on the level of reserves is as follows: the smaller the volume of US reserves, the more expensive oil. US oil reserves are published monthly, and are compiled by the Energy Information Administration.
The technology for monitoring oil reserves in the United States is surprisingly primitive and gives approximate figures. The fact is that the agency only examines companies that hold at least 500 barrels of crude oil, that is, it deals only with large players at the American oil site. And smaller players in the US are missing. Such collisions underestimate the true reserves of crude oil. Nevertheless, the indicator of reserve oil reserves is a valuable and reliable criterion for the level of demand and oil prices, since it can be tracked in dynamics (which, in fact, is what everyone does).
When asked how much oil is available in the United States at the moment, no one can give an exact answer. Stocks are a number that changes frequently and quickly. Storage facilities, for example, are devastated more during the summer period: if in the spring about 2-3 million barrels are pumped out a week, then in the middle of summer this volume reaches 6–7 million barrels for the same period.
Oil production also plays a role. Sometimes there are recessions, which also affects the level of stocks in the direction of reduction.
Crash or stability
The country’s strategic reserves of crude oil in the US vaults will last only five days. But they also pumped commercial oil, the volumes of which are less than strategic by about one and a half times.
The United States likes to speculate about the size of oil reserves in a variety of information sources. Favorite thing is to predict an imminent collapse of the system of reserve oil reserves (the reasons are called very different).
It is clear that all indicators related to oil reserves in the US and in the world are extremely volatile. But about the collapse of talking, probably too early. The fact is that with all the variability of the cost and demand factors for oil in the world, the volume of total reserves of oil products has not changed by more than 10% over the past twenty-five years. It is approximately one billion seven hundred million barrels. This can be called true stability.
Shale revolution
The USA is the only country where the shale revolution has truly taken place. It began in 2002, when shale oil reserves in the United States were confirmed, and for the first time fracking was applied for horizontal drilling. As is often the case with new breakthrough technologies, expectations from its use were significantly overstated at one time. This has led to serious financial losses and discrediting shale mining technology in general.
The high cost of production due to sophisticated technology is not the biggest problem of shale oil. It is much more serious that a large amount of fresh water is spent for its extraction. There are other negative environmental nuances.
In many countries, shale oil is not produced, despite its large reserves. The reason most often is the lack of fresh water, sometimes - inappropriate parameters of shale deposits. In Poland, for example, billions of dollars have been invested in the construction of drilling rigs. None of the installations are currently operational.
In the United States, shale oil reserves and constantly improving production technologies in 2018 led to an investment renaissance in the oil industry. Investor confidence is reborn. Commercial oil reserves grew by an order of magnitude. Economists have very optimistic expectations.
To date, the state and volume of oil reserves in the United States remains one of the most sensitive tuning forks of the state of the oil market as a whole.