The Strategic Petroleum Reserve is falling apart. Not from lack of oil. From having oil. For too long. In holes in the ground that were dug when Nixon was president.
Emergency releases strained the infrastructure. That's the headline. Emergency releases. Like draining a bathtub strained the bathtub. The barrels just sat there doing nothing for fifty years and now everyone acts surprised the pipes are corroded.
714 million barrels of authorized storage capacity. Authorized. The Department of Energy needed permission to imagine a number. Some guy in 1975 said we might need this much oil someday and Congress said sure sounds good and now we're all pretending that matters. Half of it probably evaporated.
The reserve exists so we don't run out of oil during an emergency. The emergency happened. We released the oil. The infrastructure couldn't handle it. So now the backup plan needs a backup plan. This is like keeping a fire extinguisher in your house for forty years and when the kitchen catches fire the extinguisher explodes.
Retail traders saw this headline and immediately started googling oil futures. They think old infrastructure means supply constraints. They think supply constraints mean line goes up. They do not think about the fact that the reserve exists specifically to prevent line from going up. They bought USO calls anyway.
The facilities are located in Louisiana and Texas along the Gulf Coast. Salt caverns. Giant holes full of crude oil that we drilled into the earth and forgot about until we needed them. Turns out salt caverns require maintenance. Shocking development. Salt does things over time. It moves. It shifts. It doesn't just sit there being a good little cavern.
The Department of Energy now has to fix decades-old storage facilities while also maintaining emergency readiness. They have to repair the thing while pretending it still works. It's a 714-million-barrel participation trophy that rusted through.
Photo by Documerica on Unsplash
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